Fresh signs emerged Wednesday of a stalling economic recovery, raising the stakes for President Donald Trump’s surprise refusal to sign the $900 billion stimulus package unless changes are made.
The Labor Department reported that jobless claims remained high last week, with 803,000 people seeking new benefits. And the Commerce Department said U.S. household spending slipped in November. People’s incomes also fell 1.1% last month.
After months of stop-and-start negotiations, the relief package was supposed to spray a new round of stimulus into the economy to help households and businesses fighting to make it through the winter. The 5,593-page measure passed the House and Senate Monday night, and Trump’s aides had signaled he supported it before he announced he in fact did not.
The latest twist comes as millions of Americans have waited months for aid and the coronavirus pandemic is surging with record force. Economists say delaying action much longer only leads to permanent scarring. Congress passed the $2.2 trillion Cares Act in March to help the economy as the pandemic began its first sustained wave.
That law sent $1,200 stimulus checks to millions of Americans, provided new unemployment benefits, and directed billions of dollars to airlines and small businesses. The new law was supposed to renew some of those programs.
“What we did with Cares Act was we built a firewall around the covid-impacted parts of the economy,” said Constance Hunter, chief economist at KPMG. “We did a very good job of building the firewall, and what we saw in today’s data is that firewall is eroding.”
Chief among Trump’s demands, which he outlined in a video posted to Twitter, are $2,000 stimulus checks in place of the current $600 payments. But his demand is now holding up the entire economic package, delaying any new money and potentially pushing back the date when any checks could be sent to Americans.
Democrats quickly rallied around Trump’s demand, and House Speaker Nancy Pelosi, D-Calif., plans to try to hold a vote on it as soon as Thursday. But it could be virtually impossible to pass such a measure through Congress with unanimous support, leaving the entire bill’s future uncertain.
The surge in new coronavirus cases has led a number of states to tighten up restrictions on businesses and public gatherings, leading to a new wave of layoffs and also prompting many Americans to tighten up on their spending.
The new Labor Department data that showed stubbornly high levels of jobless claims remains a worry for many economists, as it shows how many Americans are struggling to find sustained employment. The figures were a slight decrease from the previous week but still much higher than normal. Wednesday’s data showed nearly 400,000 new claims for the Pandemic Unemployment Assistance program as well.
Retail sales have also weakened, and hiring has slowed markedly since the economy reopened over the summer. The travel and tourism industries have not recovered much of the business lost since March, and thousands of companies—particularly restaurants and bars—have closed.
Without the new stimulus package, up to 14 million Americans would lose unemployment aid after Christmas. An eviction moratorium will expire at the end of the year, and $25 billion in emergency rental assistance will not get out the door. Billions of dollars for nutrition assistance, aid for small businesses, child care, transportation services and more will be in jeopardy.
Trump did not play much of a role in the economic relief talks that resulted in Congress passing the $900 billion stimulus package.
The stimulus package would extend unemployment benefits of up to $300 per week, beginning as soon as Dec. 27 and run at least through mid-March. The measure also would extend Pandemic Unemployment Assistance—which targets part-time and gig workers who did not qualify for state unemployment insurance benefits—for 11 weeks.