Economic data on Wednesday showed why there is such a dire need for help, with suspicions of a sudden federal aid package by President Trump.
Personal income fell for the second straight month in November, Commerce Department said on Wednesday, And consumer spending declined for the first time since April as government aid plummeted and a worsening epidemic continued to take a toll on the American economy.
Separate figures from the Department of Labor showed Applications for unemployment benefits remain high Increased since last week and beginning of November.
Taken together, the reports are the latest evidence that the once promising economic recovery is sputtering.
“We know things are getting worse,” said Daniel Zhao, senior economist with career site Glassdoor. “The question is how bad.”
The answer depends heavily on two factors: the path of the epidemic, and the federal government’s willingness to provide assistance.
After a delay of months, the Congress took action on Monday. Passing $ 900 billion economic relief package Which will provide assistance to the unemployed, small businesses and most households. Most tentatively, it will prevent millions of people from losing employment benefits this weekend.
But on Tuesday evening, Mr. Trump Demanded a comprehensive change in the billIt is doubtful whether he will sign it.
Criticism of Mr. Trump’s relief effort, which he called an “insult”, was not liberal enough: He called Congress to pay $ 2,000 a person directly to homes instead of the $ 600 included in the bill.
Many economists see direct payments as the least effective measures in the package, as a lot of money goes to families who do not need it. But beyond the merits of any specific measure, the real risk is that Mr. Trump’s remarks could delay aid, or derail it altogether.
The data released on Wednesday underscored the fragility of the economy. Personal income fell 1.1 percent in November and is down 3.6 percent from July, as loss of federal aid compared to rising incomes from salaries and salaries.
Consumer spending, which proved to be on the decline and decline in summer, declined by 0.4 percent, an ominous sign for small businesses trying to survive the winter. Some of the biggest drops came in categories that were most exposed to the effects of the epidemic: spending on restaurants and hotels fell 3.8 percent in November and spending on transportation, clothing and gasoline also declined.
The spending gap is spreading in the labor market. Last week, about 869,000 people filed new claims for the state’s unemployed benefits. It was down from a week earlier, but is well above the level in early November, before an increase in coronovirus cases prompted a new round of layoffs in most parts of the country.
Another 398,000 people filed for pandemic unemployment assistance, one of two federal programs for the expansion of unemployed benefits, which ended without congressional action in this month. Some forecasters expect the December employment report to show a net loss of jobs.
“The data only underscores the importance of fiscal support,” said Anita Markowska, chief financial economist at Jefferies, an investment bank. Without it, he said, “permanent damage will happen, and it will likely be very significant.”
The relief bill was smaller than was needed by many economists to carry the economy through the epidemic and ensure a strong recovery. It will not revive the hardest hit industries or undo the loss left over months of lost income for many households.
But the package may be enough to spark a wave of eviction and small-business failures that many economists warn are inevitable without it. And this should be enough to avoid falling back into recession, which the increasing number of forecasters have likely done without a quick injection of federal money.
This bet is particularly high for the millions of Americans who will be left without an income during some of the worst months of income.
The relief package passed this week will expand those two emergency programs to cover those who have survived the regular unemployment system or whose benefits have been exhausted. According to the Department of Labor, around 14 million people were enrolled in the two programs in early December, though fraud and data-collection issues meant the figure could exceed the actual total.
But if the bill does not become law, both programs will end later this week. , Could push nearly five million people into poverty overnight an estimate From Columbia University researchers.
Carson Noel has spent 35 years working on cruise ships, on Broadway and at conferences around the country. The epidemic wiped it all out.
“Over a period of a week I saw the next six months of my work,” he said.
51-year-old Mr. Noel has reached the end of both his regular unemployment payments and emergency epidemic benefits, causing him no income. The bill passed by Congress will restore their benefits for at least a few weeks, but they are now in doubt.
Even if the bill becomes law, Mr. Noel said it is too late to save his finances. He cut his grocery bill and went with his sister to Tucson to save money, but even to minimize his expenses, his savings have drastically reduced.
He said, “I’m good for another month and then I’m in trouble.” “I’m trying to survive at this point.”
The lawmakers agreed to issue incentive payments of $ 600 and a plan to distribute federal unemployment benefits of $ 300 for 11 weeks. You can get more information about the bill and what’s in it for you.
- Will I receive another incentive payment? With individual adults adjusted gross income Their 2019 returns of up to $ 75,000 dollars a year will receive a $ 600 payment, and the head of the household will receive $ 112,500 and a couple (or whose spouse died in 2020) twice the amount of up to $ 150,000 a year. If they have dependent children, they will also receive $ 600 for each child. People with incomes above these levels will receive a partial payment that declines by $ 5 for every $ 100 in income.
- When can my payment arrive? Treasury Secretary Steven Menuchin told CNBC that he expected the first payment before the end of the year. But it will be some time before all the eligible people get their money.
- Does the agreement affect unemployment insurance? The lawmakers agreed to expand the amount of time that people can collect unemployment benefits and resume an additional federal benefit that is provided on top of the usual general benefit. But instead of $ 600 per week, it would be $ 300. It will run till 14 March.
- I am behind my rent or hope to be soon. Can I get any relief? The agreement will provide $ 25 billion to be distributed through state and local governments to help those hired. To get help, families have to meet many Conditions: Household income (for 2020) cannot exceed 80 percent of the region’s average income; At least one household member must be homeless or at risk of housing instability; And individuals must qualify for unemployment benefits or face financial hardship – directly or indirectly – due to the epidemic. The agreement states that aid will be a priority for low-income families and those who have been unemployed for three months or longer.
Even if Mr. Trump signs a relief package, millions may temporarily lose their benefits.
By waiting until the last minute to act, legislators forced the state’s labor departments – which control both state and federal unemployment benefits – to prepare for the end of the programs. Many states will not be able to reverse the course in time to avoid payment defaults.
State employment officials said they were monitoring development in Washington and consulting with the federal Department of Labor to move quickly to restore benefits. But some confirmed that at least one brief omission was inevitable. Michelle Evermore, senior policy analyst for the National Employment Law Project, said any delay in signing the bill would be prolonged.
“Every day that it staggers is a day that it’s hard for kids to put food on the table, it’s missed another bill, it’s just another difficulty,” she said.
Even millions of unemployed workers face the prospect of a foggy winter, however, some people and industry are in very strong shape.
Capital goods orders – a measure of business investment – rose in November, Commerce Department said on Wednesday, A sign that large corporations also remain confident as restaurants and other small businesses struggle to survive.
In addition, household savings are $ 800 billion higher than in February, before the epidemic boosted the economy. Economists said those savings were most concentrated among white-collar workers, who have saved money by cutting spending on travel and leisure. Many have also benefited from the stock market.
The high savings level is one reason why many economists doubt the need for another round of direct assistance to households, let alone $ 2000 a person sought by Trump. Such payment can help those who have lost jobs but lost hours or income. But a lot of money goes to families that are financially secure, and would rather save the most than spend.
Having coronavirus vaccines widely available can help rapidly improve those savings, allowing Americans to start traveling, attend concerts and gather at bars and restaurants. But this possibility only underscores the need for assistance until it is ensured.
“A few months down the road, things will improve dramatically, but in the meantime it doesn’t cause damage,” said Ian Shepherdson, chief economist at Penthon Economics. “It’s simply shooting to allow yourself to be in business.”