Economist Elliot Eisenberg said Thursday that Congress should act now to provide economic relief not only to help those in need, but also to help the nation from losing momentum in its economic recovery.
The sentiment was echoed Friday by NAFCU chief economist Curt Long following the Bureau of Labor Statistics’ release of reports showing job growth slowing in November, which he said showed “the toll taken by rising COVID cases.”
BLS reported the unemployment rate was 6.7% in November, down from a peak of 14.7% in April, but still higher than the pre-pandemic rate of 3.5% in February. There were 10.7 million Americans unemployed in November, 4.9 million higher than in February.
Total non-farm jobs increased by 245,000 last month, which Long said “is not nearly fast enough given the unemployment overhang.” He also cited declining jobs in retail, restaurants, and government, as well as falling rates for labor force participation.
“This data should provide more impetus for Congress to pass a stimulus effort in order to nurse the recovery through the initial months of 2021 until a vaccine is widely available,” Long said.
Eisenberg cited a medley of positive trends, including improving manufacturing output, rising capital goods orders, healthy returns on assets for banks, higher used car values, a robust housing market and declining unemployment.
He also cited lower loan loss provisions by banks in the third quarter, which he said indicated bank executives had decided they have set aside enough money for now.
While most key trends show improvement, he said the rate of improvement is slowing just as the economy approaches some of its greatest threats, including rising COVID-19 cases and many households reaching a financial crisis.
“The economy has started to run out of gas,” he said during a webinar sponsored by Origence, a division of CU Direct of Irvine, Calif.
The recession set off a surge in savings, and households are now holding about $800 billion to $1.3 trillion in savings with the distribution likely skewed to wealthier households.
Consumer sentiment is wavering with each burst of good and bad news, and about 20 million people are poised to lose unemployment assistance, loan forbearances, protection from eviction or other benefits before the end of the month.
From a “risk management perspective,” he said it would be helpful for Congress to appropriate $800 million to $1 trillion in the next two to three weeks.
“Don’t give checks to everybody. Give it to the people who need it,” he said. “Maybe it’s wasting money, but if it saves us from a double-dip recession, it’s worth it.”
If Congress fails to act, Eisenberg said the odds will rise that the Fed will step in to provide fiscal stimulus through targeted bond buybacks.
The odds of getting a powerful dose of economic stimulus will rise after Biden takes office Jan. 20, but most of the impact will be muted if the Senate remains in Republican hands, which he said appears likely “from everything I read.”
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