Incredibly, the stock market and Wall Street continue to party (e.g.'Wall Street Parties Despite Turmoil' WSJ, June 5, p. B11) despite an ongoing pandemic, a cratered economy, great Depression unemployment numbers and civil unrest in dozens of cities. It is as if the stock market and Maul Street are totally divorced from the realities of Main Street. Or, to put it into the context of WSJ columnist James Mackintosh (ibid.):
"Why is the market rising even as U.S. cities burn and the prospect of a second round pf coronavirus infections remains real?....It is deeply uncomfortable to watch Wall Street party while Main Street emerges from lockdown into tear gas."
But the other side of the economic coin which does apply to Main Street is the unemployment report which came out Friday, and saw a figure: 13.3 % - significantly less than what most economists and pundits projected (19%) . For example, when the report was released I watched CBS finance guru Jill Schlesinger fumbling for words to account for the difference from what was otherwise expected. Of course, the Right was jubilant because to them the premature WSJ editorial: 'The Economy Rises From The Dead", (June 6-7, p. A12) blathering "the job market heals faster than expected" meant no further government money to be doled out to American workers. Thereby ending further threats of encroaching "statism", or god forbid, socialism. (Note: a same day column elsewhere in the Journal stated:"The jobs report is subject to revisions.....which given the difficulty in collecting data in the midst of the Covid-19 crisis, can be enormous."
I confess that my first inclination, and Janice's, was to suspect that the BLS fudged the numbers the way they do unemployment stats in general, i.e. dropping people off the rolls if they cease job searches for 6 months. Paul Krugman - Nobel winning economist and NY Times columnist- had a different take, however. This was expressed at the end of All In last Friday.
He warned the Right and Republicans will use the report "positive" result to rationalize why no more stimulus checks - or continued higher unemployment checks - will be needed. Which would be a dreadful mistake. Because we aren't out of the dire conditions by a long shot. As a Business & Investing piece in the WSJ Friday noted (p. B12):
"The boost from the stimulus checks most Americans received last month is already waning. A recent analysis found that people with less than $500 in their bank accounts spent nearly half their stimulus payments within ten days of receiving them,"
Meanwhile, as reported in The Denver Post Sunday (Business, p. 1K) according to Ali Wolf , chief economist with Meyers Research:
"Many consumers remain unable or unwilling to spend as they did before.
This is serious because it is consumer spending that props up nearly 70 percent of the American economy. But Americans are keeping their money in their wallets because they have no idea when the next income check, or stimulus check will arrive - if at all. As one economist put it in the Post piece (ibid.):
"Normally, savings are good, but they can be too much of a good thing in an economy that relies on consumer spending for 70 percent of its activity. Anything consistently above 15 or 20% is a dangerously high level." (Consumer spending plunged 13.6 % in April)"
But you can't blame Americans for pulling in the spending strings -even if it means keeping the economy at low throttle - if they can't depend on congress (namely the Repukes) to cough up the extra money they need. And as Krugman noted, by the end of July all the unemployment bonus checks will also cease, leaving millions in the lurch. Combined with the GOP using the "better" unemployment numbers to keep money tight - we may be seeing a downturn by the end of the year. As pointed out by economist Wolf (ibid.), given people expect that government support will dry up soon they are stockpiling money to get them through the months ahead. But this will ensure a prolonged downturn and more serious 'W' -shaped recession.
Reinforcing that view, we now know- as per a '60 Minutes' report on Sunday - that the unemployment report was indeed bogus. As CBS' Scott Pelley reported, the BLS had admitted to a "misclassification error" which saw an additional 5 million Americans uncounted as unemployed. The BLS conceded the actual unemployment was three percentage points higher, or 16.3 percent - actually in line with what most serious economists believed. The highest since the great Depression.
Never mind, the GOP will still argue that it doesn't matter and the numbers are on their way to improvement, so Americans still don't need more gov't support. Well, tell that to the tens of thousands who have had to take money from their 401(k)s to stay afloat, such as one Heaher Semler - identified in a WSJ piece from last Friday about workers raiding retirement accounts. As the piece noted:
"Ms. Semler withdrew $14,000 from one of two 401(k) retirement accounts she had. She used it to pay credit card bills and buy a car, keeping $3,000 for emergencies."
And Semler is one of the lucky ones given she had a retirement account to raid. Millions more Americans don't - or not enough to cover expenses, including utilities, groceries and medical. So no wonder they are in the mode of stockpiling any money they get. Why be surprised when Bankrate estimates that a quarter of U.S. households had no emergency savings even before the lockdowns went into effect?
Who to blame? The tight-fisted Republicans, of course! As I wrote in earlier posts the unemployment check bonuses need to continue at least through September, and at least three more stimulus checks of $1,200 each are needed. I referred to such a program as temporary "universal basic income".
But what is the Republicans' solution? According to a WSJ piece from June 2, p. A5:
"Democrats want to send another round of stimulus checks to U.S. households..Republicans argue that the stimulus is to encourage people to return to work, as well as liability protections as businesses across the country reopen."
In other words, the Republicans are more concerned with protecting businesses in case employees returning to work get infected and even die from Covid-19. Since they realize telling Americans to get their asses back to work is the way to get more $$$ carries more risk - for business, employers - if customers and workers get ill.
Moral of the story? Don't hold yur breath for the GOP to do the right thing. Keep stashing your money, your cash from the unemployment checks and stimulus money from CARES 1. If that saving means a further downturn or exacerbated recession, so be it. Blame the Repukes!
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