The December slump kept the unemployment rate at 6.7%, indicating that the distribution and adoption of coronavirus vaccines must increase rapidly to avoid greater damage and may recover in spring and summer.
It will give Biden and the Democrats more leeway to pass trillions of dollars in stimulus spending through any available legislative means, including providing a lot of help to state and local governments. This also means that Democrats will likely be able to approve enough direct cash to reach the “$2,000 check” level they have long supported, including a $600 check approved by Congress last month and signed by Trump.
Harvard Professor Jason Furman, chairman of the Harvard Economic Advisory Council, said: “The economy reversed in December, and we still have 1
The December employment report cemented Trump’s strange legacy. The United States will have millions of jobs less than when he took office, partly because the federal government’s response to the coronavirus has been slow and stalled. But since the spring, the stock market has recovered all the losses, and now it has set a new record again, because many companies that thrived during the lock-up period soared, and investors bet on strong development in 2021.
The bifurcation led to a clear “K-shaped” recovery. At this stage, most of the highest-level workers were not even fully recovered, while thousands of low-paid service industry Americans suffered losses. Economic inequality was already serious, but it was already serious before the virus was infected, and it has now reached the highest level since the Great Depression in the 1920s. Reversing this trend is Biden’s top priority. After the Democratic Party won two elections in Georgia, he now has more weapons available to the Senate majority.
Biden will fully control Washington during the first two years of his term, although not in the Senate majority, but in Washington. His economic adviser plans to focus on spending to increase the distribution of vaccinations, support troubled states and local governments, improve US infrastructure, further expand unemployment benefits, and inject more direct cash into individual households.
Economists and Wall Street analysts said that some of the recent market optimism is based on the assumption that even if Democrats decide not to blow up the legislative opposition, Biden can fulfill most of its requirements, which requires 60 votes in the Senate. To overcome.
However, they will have many opportunities to use the “budget reconciliation” tool to pass substantially increased spending with only one vote of profit in the Senate. Considering the emergence of new coronavirus cases and the slowness of vaccine launches, the presence of more Republicans in the Senate may increase the demand for stimulus spending.
Joseph Brusulas, chief economist at consulting firm RLM, said: “As the election in Georgia gives the Democratic Party control, we should expect to receive a considerable targeted financial aid package in the first quarter of this year. Investors have clearly grasped this plan.”. “We will quickly get targeted financial aid packages, then another stimulus package, then infrastructure. These are huge things.”
As states are already struggling to pay the billions of dollars in additional benefits approved by Congress last month, state and local aid has become particularly important, leading to delays in payments in California, Michigan, Florida and Washington for several weeks. In the Covid era, reduced taxes have led to the loss of state and local government jobs, and the need to balance budgets, which has also led to a decline in the number of employees nationwide.
Failure to approve greater stimulus spending could lead the economy to a double bottoming recession, or a repeat of the slow, halted and unequal recovery after the 2008 financial crisis. The Biden team had worked in the government during Obama’s tenure and was determined to learn the lessons of the last major slowdown.
Nonetheless, even with significant stimulus spending, the recovery will largely depend on the effective and widespread adoption of vaccines. Even then, the virus infection may still take years to recover economic conditions. Furman said: “I worry that some of the scars are extensive enough that we cannot fully recover by the end of 2021.” “Today’s numbers expand the open window that could provide more support to the economy, but it will not be until 2022 or 2023. We will be able to return to our ideal state in the next year. It will take some time in some places.”
In December, due to the huge drop caused by the virus, the job loss ended seven months of growth, mainly in the service industry. As cold weather and new shutdowns limited demand, restaurants and bars cut 372,000 jobs. Overall, employment in the leisure and hospitality industry (including hotels, tourist attractions and other categories) decreased by 498,000. The gains in professional and business services, retail and other sectors are not enough to offset the huge losses elsewhere. Due to the tightening of the national budget, government work was reduced by 45,000.
Approximately 11 million people are now unemployed, and the unemployment rate remains at 6.7%, which is far below its peak of over 14% in the Covid era, but still twice the level before Covid was hit. Nearly 20 million Americans still receive some form of unemployment assistance.
However, given the prospect of vaccines and more financial aid, Wall Street traders and many economists still hope that the decline in employment will be reversed early this year. However, if any of them fails, the numbers may deteriorate significantly.
James Knightley, chief international economist at financial company ING: “Although we remain optimistic about the mid- to long-term prospects of the United States, we must prepare for worse economic data that may continue into the second half of 2021. “, wrote in the instructions to customers on Friday.