James Bullard, president of the Federal Reserve Bank of St. Louis, has been a vocal contrarian on the need for immediate stimulus. “There may be enough resources right now, at least for 2020,” he said late last month at virtual community banking conference. “You could probably wait until next year and then you could assess the situation.”
Several reports last week showed the rebound slowing or presented warning signs for the future. Employers added fewer jobs than forecast in September and many Americans quit looking for work. Weekly filings for unemployment claims remain well above pre-pandemic levels and Americans’ incomes fell in August following the end of supplemental jobless benefits.
Also last week, American Airlines Group Inc. and United Airlines Holdings Inc. said they would start laying off 32,000 workers, blaming expiring government aid, the latest in a drumbeat of mass job cuts. Walt Disney Co. is slashing 28,000 workers while Allstate Corp., the fourth-largest car insurer in the U.S., said it will cut about 3,800 jobs, roughly 8% of its workforce.
Corporate executives expressed dismay over the halt in talks.
“It’s serious damage and obviously a lot of pain that’s going to extend through the end of the year and into the holiday season,” said Aneta Markowska, chief U.S. financial economist at Jefferies LLC. “As far as having a lasting consequence for the economy, that depends on what happens in January.”
Americans who are unemployed are jobless for longer period of time
Even before Trump’s announcement, the long deadlock over stimulus had already led many economists, including the teams at Goldman Sachs Group Inc. and JPMorgan Chase & Co., to write off the prospects of new steps before the election -- and lower their economic growth forecasts for the current quarter.
The focus has shifted to the spending measures that might get passed under whatever combination of White House and congressional control emerges from the Nov. 3 vote.
Many Wall Street analysts say a Democratic sweep would deliver the biggest fiscal boost to the economy -- because lawmakers will probably approve a big virus-relief bill right after taking office, while Democratic candidate Joe Biden is promising higher government spending than Trump.
In the shorter term, though, the economic effect is simple math: Less money flowing into the bank accounts of Americans and small businesses means less money to spend on goods and services and a diminished ability for employers to keep workers on staff.
“What we’re looking at is a likelihood of a slowing in consumption and it puts the extent of the recovery at risk,” said Joel Naroff, president and chief economist at Naroff Economics LLC.