The U.S. economy has continued to grow despite a summer spike in coronavirus cases and the end of massive federal aid, but millions of Americans are being excluded or at risk of being left behind.
As the fall approached, the overall economy performed better than expected. Hiring rose again in August, consumer spending was steady, manufacturers are still picking up, and demand for new homes and cars was surprisingly strong.
See: MarketWatch Economic Calendar
Next week’s data is likely to show another robust increase in retail sales in August and an improvement in production among producers in September, suggesting that a recovery in the US is still underway even though it has eased.
Yet a new divide has emerged between the haves and the haves, with the have-nots those whose livelihoods have been most disrupted by the coronavirus pandemic.
Consider a couple of areas: finance and hospitality.
The unemployment rate among banks, insurance companies, Wall Street brokers and other companies involved in money management was only 4.2% in August. It is not much higher than the national unemployment rate just before the pandemic struck in March.
To read: Consumer prices in the United States rise for the third consecutive month as the cost of used cars rises
In contrast, the unemployment rate for companies involved in travel, hotels, restaurants and other forms of entertainment and hospitality stood at a staggering 21.3% last month. What’s worse, these jobs tend to pay far less than professional work in industries like finance and technology.
Many of the major economic reports on the economy, however, tell us very little about this gap.
Retail sales and consumer spending, for example, were stronger than expected. What it most likely reflects are the habits of high-income workers with secure jobs working from home. They can afford to spend, and that’s what they’re doing.
The high demand among these individuals helps explain the strong home and car sales. And they have even more reason to spend given a massive stock market rebound that has pushed their net worth close to pre-pandemic levels.
Steve Blitz, chief economist at TS Lombard, said it has long been an industry maxim that the richest 20% of Americans account for up to 80% of all discretionary spending. If so now, they are making recovery seem better than it is.
The millions of still unemployed Americans who are struggling to make ends meet lack that luxury, especially after the extra $ 600 in federal unemployment benefits expired in July.
“It’s a significant loss for people who don’t get it anymore,” Blitz said.
The loss of income for these Americans and the devastation caused to airlines, hotels, restaurants and retailers could eventually seep into the wider economy and even harm high-income workers and the stock market.
Just this month, a bunch of large airlines, hotels, mall operators and others announced they will permanently cut more jobs unless Washington provides additional aid. US jobless claims have been on the rise for four consecutive weeks, potentially another warning sign of future problems.
To read: Claims for unemployment benefits increased for the fourth consecutive week as a sign of stalled labor
Also: The claims for unemployment benefits in the United States are increasing again and this state is a big reason for that
The Federal Reserve, which meets this week to assess the economy, is still quite concerned that top central bankers are continuing to demand greater financial relief from Congress.
Normally very reticent in advising lawmakers, the Fed has been surprisingly open because it fears the recovery will stop unless Congress puts more wind behind it.
The fires in California, the state with the nation’s largest economy, aren’t helping. The fires have displaced many people and dramatically increased claims for unemployment benefits.
Nothing has changed in Washington so far, though. Last week, Democrats blocked a “meager” Republican law that would have provided a little more aid to the economy. Democrats want a much larger spending bill that Republicans have resisted.
With the pivotal 2020 election looming in November, the odds of another major financial aid package appear to be dwindling by the day. Perhaps the only thing that will push Congress to act, analysts say, is a sudden dip in the recovery.
It didn’t happen in August, however, and it doesn’t look like the economy will suddenly run out of steam in September either.
“As hard as it would have been to believe a few weeks ago, it now seems entirely credible that we are headed for elections without any new measures,” said chief economist Douglas Porter of BMO Capital Markets.
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