Americans got some good news last week: The May jobs report showed that the economic damage wrought by the coronavirus pandemic was less than feared. That may be bad news if you, like so many Americans, were hoping for a second stimulus check.
U.S. employers added 2.5 million jobs in May and the jobless rate declined to 13.3% from 14.7%, according to data from the Labor Department released last week. It was a better outcome than many experts had expected: Economists had forecast further job losses and an unemployment rate closer to 20%.
While that's beneficial for the economy overall, it has put a damper on talks of further economic stimulus packages. For households, that may mean a second stimulus check is not on the way, or at least not anytime soon.
On the plus side, though, for people who're hoping for more direct government help, members of Congress are considering "back-to-work" bonuses ranging in value from $450 a week to up to $1,200.
Last month, House Democrats passed the HEROES Act, which would give households a second stimulus check of up to $6,000 in some cases and extend the $600-a-week enhanced unemployment benefits currently set to expire at the end of July. That bill has stalled in the Senate.
Since then, lawmakers have brought forth alternative proposals, including a "return-to-work bonus" that could pay people who are currently unemployed up to $450 per week to return to their jobs. Other bills would give the unemployed bonuses of up to $1,200 to go back. In both cases, the payouts would be available through July.
Some lawmakers prefer a return-to-work bonus over a second stimulus check because they think it would help the economy recover faster and ultimately be less costly to the government. The bonus would also lure people back into employment by replacing, or rerouting, some of the current enhanced $600-a-week unemployment benefits. Those more generous benefits, lawmakers fear, make it worthwhile for people to stay home.
Howard Dvorkin, a certified public accountant and chairman of the personal finance site Debt.com, agrees: "It makes no sense to pay people more than they were getting working."
Millions of Americans are still getting an extra $600 per week on top of their ordinary unemployment benefits. If that provision does expire, as planned, on July 31, it could have an adverse effect on the economy, experts warn, as potentially tens of millions of people would see their incomes drop significantly.
"We've never seen a flood into the unemployment system like the one we've seen recently," Alan Blinder, former vice chair of the Federal Reserve and a professor of economics at Princeton University recently told Grow. "And these benefits are an automatic stabilizer that helps not only the unemployed but the whole economy." This is a time for the U.S. government to be more generous, rather than less, he argues.
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Theoretically, a population with fewer dollars to spend will reduce their spending, depressing demand, and cause an economic slowdown — or, in this case, drag out the current recession.
"The real effects of this recession haven't been shown yet. We're a consumer-driven economy," says Dvorkin. "When consumers aren't out there shopping, there's going to be some hits on the economy."
That the May jobs report showed a better-than-expected economy came as a pleasant surprise. Still, it caused many lawmakers to hit pause on attempting to push through another costly stimulus package.
The jobs report "takes a lot of the wind out of the sails of any Phase 4," White House economic advisor Stephen Moore told The Washington Post. "We don't need it now. There's no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report."
Senate Majority Leader Mitch McConnell said earlier this week that if Republicans do take up another stimulus bill, it wouldn't be until late July at the earliest. After July 3, the Senate is scheduled to go on a two-week recess. Senators will come back for another three weeks, and then go on another recess until September. With so many legislative breaks on the schedule, it may be difficult to write up, vote on, and pass another big stimulus package.
So while extra stimulus measures aren't completely off the table, Republicans aren't in a rush to pass a new bill. At the same time, government officials are crediting previous stimulus measures for blunting the pandemic's effects from plunging the economy into a deeper recession.
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"This economic positioning is the direct result of the Trump administration and Congress working together to pass bipartisan legislation to provide necessary liquidity to workers and markets," Treasury Secretary Steven Mnuchin said during a Senate hearing Wednesday.
Mnuchin added that if the U.S. hopes to keep the economic momentum rolling, that Congress will need to take action — a statement that's somewhat at odds with the general congressional Republican view that another stimulus isn't necessary.
"I definitely think we are going to need another bipartisan plan," Mnuchin said.
Though many parts of the country have reopened, the pandemic is not over. In some parts of the country the number of new cases is spiking, including in Republican-dominated states like Iowa, Arkansas, Utah, and Texas. A viral resurgence in those states could potentially spur lawmakers to enact more stimulus measures.
There's also the chance that a large-scale second wave of infections could hit the U.S. in the fall, as some experts have predicted, prompting another round of quarantines and layoffs.
If that's the case, the need for more stimulus measures could become more pronounced in the fall. The presidential election in November could add another wrinkle, though, as policymakers may be wary of passing legislation so close to an election.
What will happen next is probably more "wait and see," says Dvorkin. Though he doesn't think that another large, multitrillion dollar package is necessarily the right move, Dvorkin says that he expects more stimulus legislation will be signed into law in the next few months.
"I believe some sort of stimulus package gets pushed out there. I don't know what it looks like," he says, but "something will be out there."
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