One reality that gets lost in translation when discussing emergency aid and stimulus plans is how important they have been in keeping the US from a double-dip recession as we have seen abroad.
The rebound in growth last spring was triggered in large part because of the funding triggered by the CAREs Act. It was much more robust than elsewhere but then the momentum on jobs petered out over the summer and into the fall, as another wave hit the Sunbelt.
People moved indoors without masks in scorching heat, which bolstered transmission of an airborne virus. This overwhelmed hospitals and triggered fear & restrictions that slowed pace of job growth. The cushion provided by the CAREs Act for the millions unemployed ran out.
Those who had money and could continue work from home spent on goods,lots of big ticket items - vehicles, RVs, boats, furniture, appliances & vacation homes. Pent up demand on first homes was also unleashed for well pained millennials who delayed home buying & starting families
That triggered an amazing rebound and bottlenecks in trade & manufacturing. Outlier was housing, which soared along w prices in a market with little supply. We have under built since recession in 08-09, baby boomers aged in place and some feared listing amidst pandemic.
Job growth further slowed as we got into the fourth quarter as funds ran out for hardest hit. Hunger and homeless ⬆️. Third & most vicious wave hit. Hospitals were overwhelmed, fatalities surged. Restrictions & fear slowed spending & job gains. Retail sales fell 3 months in a row
Employment contracted in December. Congress passed another tranche of temporary help. Sure enough - spending and jobs reversed in January, the minute stimulus checks hit consumer wallets. But the bridge we built was temporary - much expires this month.
So back to the drawing board. A new plan - bigger than estimated need but now hedging the reality that we tend to lose steam on jobs every time virus flares. A fourth wave in the spring & fall is probable. Vaccinations will help mitigate worst in outcomes...
/but can’t stop the virus from mutating - that is what virus do. Many also remain reluctant to take vaccines or mask. This ups the risk of another wave of infections. Employment should surge this spring but we have a long way to go to recoup losses - 9.5M in hole.
The virus will require we are cautious longer and ramp up rapid testing (which is coming on line) and tracing to keep outbreaks at a min. We could see a setback this spring with variants. The fall is most worrisome. Job gains will likely slow before we recoup what was lost, again
The world that emerges with resemble but not replicate the world we left behind. Too much time has passed to flip a switch and restore all of what was. The result is an economy that will likely need more support & restorative policies for longer. Think catch up on education lost
The shift to a hybrid of work from home, our ability to leverage and accelerate online spending, streaming & the push to automate & leverage AI has changed the service sector and will displace some workers even as we congregate again. We need to deal w getting their skills up.
Sustained growth requires us to eliminate inequalities to tap our full potential. Systemic bias is inefficient as well as immoral; it leaves resources needed untapped and a smaller pie for all of us to share a slice of.
Moral of the story - doing the same thing & expecting different results is foolish. (Understatement). The US economy has done better because we supported it. Are their inflation risks? Airfares & hotel room rates will surge; algorithms are designed to ensure they do.
But, hard to sustain those gains and have them morph into a more systemic inflation unless we see an much more rapid tightening of the labor market and shift in the ability of workers to demand wage increases. If that happens rapidly - then that is wonderful.
The @federalreserve can finally do what it was meant to do & raise rates to dampen inflation instead of trying to stop a further deceleration in overall price levels & we can celebrate a triumph instead of another tragedy. /Fin
• • •
Missing some Tweet in this thread? You can try to
force a refresh
