Three Alarming Economic Numbers That May Force A Second Stimulus Deal In Washington
Negotiations in Washington over the next stimulus bill may get a boost from a spate of grim economic numbers including a major GDP contraction, more weekly unemployment claims and a new analysis of Paycheck Protection Program aid that all paint a picture of an economic recovery on the brink of collapse.
The Commerce Department said Thursday that U.S. GDP had fallen a historic 9.5% from the first quarter to the second quarter.
Meanwhile, new data from the Labor Department shows weekly unemployment claims rose for the second week in a row after several straight months of declines from the March peak.
On top of that, more than 150 businesses that received hundreds of millions of dollars in Paycheck Protection Program funds are still planning to lay off thousands of employees, according to a new analysis by S&P Global.
That’s an indicator that the first tranche of PPP funds has “have proven insufficient” for many small businesses, S&P’s researchers write, and it’s a signal that there’s a need for more PPP funding—something both Republicans and Democrats agree should be included in the next stimulus bill.
Republican lawmakers in Washington had touted a “wait and see” approach to the next stimulus package after the CARES Act was passed in March; now they are racing to come to an agreement with Democrats (and preparing for the possibility that that deal might not come soon) on more federal aid before the economic devastation gets worse.
Taken together, the data paints a picture of precarious—and even faltering—economic recovery.
“In another world, a sharp drop in activity would have been just a good, necessary blip while we addressed the virus,” Heather Boushey, president of the Washington Center for Equitable Growth, told the New York Times. “From where we sit in July, we know that this wasn’t just a short-term blip.”
The grim economic data comes amid an alarming spike in Covid-19 cases across the country—both Florida and California Wednesday broke records for single-day coronavirus deaths. Federal Reserve chair Jerome Powell warned Wednesday that the surge in infections is beginning to affect economic growth. “It looks like the data are pointing to a slowing in the pace of the recovery,” he said, adding that the nature of that recovery will “depend significantly” on the containment of the virus, and that people will only resume spending at pre-pandemic levels when they feel it’s safe to do so. Powell noted that as a result of new shutdowns and business closures, consumer spending and rehiring by small businesses are both beginning to slow.
What to watch for
Expiring protections from the CARES Act—supplemental federal unemployment assistance and an eviction moratorium protecting certain renters—are forcing lawmakers into a time crunch (albeit one that has been on the calendar for months). President Trump has floated a side deal to get around the issue, though Democratic leaders (and some Republicans) are opposed to that approach.
Economy Shrank At Historic 33% Annual Rate In Second Quarter—But That’s Not The Whole Story (Forbes)
Second Stimulus: White House Chief Of Staff Says Congress ‘Nowhere Close To A Deal’ (Forbes)
Trump Suddenly Wants A Side Deal Ahead Of Next Stimulus Bill That Would Protect Renters From Eviction (Forbes)
California Again Breaks Record For Most Coronavirus Deaths: 197 Fatalities In A Single Day (Forbes)