While the U.S. government and the Federal Reserve pump trillions into corporate welfare programs and stock markets, U.S. Labor Secretary Eugene Scalia (who’s papa Anthony was Associate Justice of the Supreme Court Judge) wants to end the $600-a-week federal “COVID” unemployment benefit enacted by Congress that helps keep households solvent as millions of workers lost their jobs… after it ends in July.
The federal payments will not be needed because the U.S. economy will be “in a very different place in July … where the opportunity for people to return to work will be far greater,” declared the Daddy’s Boy.
“The recovery in the job market has actually happened more quickly than Congress expected in late March,” he added.
Employers hired 2.5 million workers in May, the labor department reported. However, 1.5 million people filed new unemployment claims during the week ending 5 June.
When added to state unemployment benefits, the $600 weekly federal payment allows many jobless people to collect more money off the job than on, studies have shown.
Republicans in Congress contend the federal payment gives unemployed people an incentive to remain out of work as long as possible, slowing any economic recovery.
Democrats counter that the subsidies enable households to pay bills and continue spending, helping to sustain the economy until shutdown orders are relaxed.
Earlier this month, the Congressional Budget Office (CBO) estimated that continuing the federal payment through January 2021 would give five out of every six workers a higher income than they earned while working and that the federal windfall would slow the number of workers returning to jobs.
The government’s $600 weekly stipend would boost spending in the short term but not in the long term, the CBO noted.
TREND FORECAST: Expecting the U.S. economy to be “in a very different place” in August than it was in April is to believe the economy will come roaring back once politicians give it permission to.
As we have noted by the facts, that is fantasy. Yes, there will be a rebound, but with the U.S. service sector economy limited by dictatorial, costly regulations imposed by politicians to fully operate, sustained economic growth will not prevail.
People have been using their federal windfalls not only to survive unemployment but also to pay down bills and hoard cash against an uncertain future.
And, as evidenced, with retail sales increasing a record 17.7 percent in May, there will be quick bursts of spending as stores reopen. But we forecast those spurts will not be enough to restore the economy to anything like its pre-pandemic pace within two or three months as Scalia declared.
TREND FORECAST: There will be no V-shaped recovery. There will be no U-shaped recovery. The recovery will be slow and bumpy as different sectors of the economy and different geographic areas grope their way back toward growth.
Again, as we had forecast, the “Greatest Depression” has begun. And now, our forecasts are being repeated by the Federal Reserve, World Bank and Organization for Economic Cooperation and Development (OECD) and others as reported in this and previous Trends Journals.
