Dark Days Ahead
Last spring, U.S. lawmakers embarked on an extraordinary undertaking: They gave people who suddenly didn’t have jobs a lot of money.
Adding $600 a week to normally paltry unemployment insurance payouts directed desperately needed emergency aid to laid-off workers, helping stabilize their finances in the face of extreme economic dysfunction.
The payments created unusual incentives and generated curious results: record high unemployment but near pristine credit quality across all consumer credit categories.
The experiment ended in waves beginning in October, finally petering out the day after Christmas. We got our first look at the real economy — Main Street, not Wall Street — without that additional stimulus.
It wasn’t pretty.
The nascent economic rebound has started to slow due to the coronavirus pandemic’s unabated surge. Job growth at the end of 2020 was significantly worse than expected: The economy lost 140,000 jobs last month, according to the Bureau of Labor Statistics. Economists surveyed by The Wall Street Journal in early December had expected a modest gain.
Looking ahead, they expect the economy to expand at a 1.9% annual rate in the first quarter — a downward revision from 3.3% that they predicted just a month prior. They also expect that just under 295,000 new jobs will be added each month from January through March — an ambitious figure that now seems wildly optimistic.
Unemployment claims are on the rise. People are hurting. An Associated Press analysis of 181 food banks in the Feeding America network found they distributed almost 57% more food in the third quarter of 2020, compared with the same period in 2019. The hunger-fighting organization distributed 4.2 billion meals from March through October; two out of every five recipients were first timers.
The recently passed $900 billion stimulus bill, with its additional unemployment payments of $300 a week through March 14, should help. A recent analysis from S&P Global Ratings estimates that the U.S. economy would reach its pre-pandemic GDP level by the third quarter of 2021 with a $1 trillion aid package.
This latest stimulus fell just short of that figure. But along with the widespread vaccination efforts, it does give some hope for a brighter end of 2021.
However, the year just started, and we’re nowhere near there yet.
• Kiah Lau Haslett, managing editor of Bank Director
