The US economy has continued to grow despite a summer spike in coronovirus cases and the end of large-scale federal aid, but millions of Americans are either left out or at risk of being left behind.
With the decline, the broader economy has fared better than expected. Hiring rose again in August, consumer spending remained stable, manufacturers were still on the upswing and demand for homes and new cars was surprisingly strong.
The data for the upcoming week is likely to show another strong increase in retail sales in August, as well as an improvement in production among manufacturers in September, suggesting a US recovery even though it has still closed.
Yet a new division has emerged between hass and knots – with knots whose livelihoods have been most severely hampered by the coronovirus epidemic.
Consider a pair of industries: finance and hospitality.
In August the unemployment rate was only 4.2%, among banks, insurance companies, Wall Street brokerages and other companies involved in money handling. This is not much higher than the national rate of unemployment shortly before the epidemic arrived in March.
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In contrast, the unemployment rate for companies involved in travel, hotels, dining out and other forms of leisure was astonishing 21.3% last month. What’s worse, these jobs pay far less than professional work in areas such as finance and technology.
Several major economic reports on the economy, however, tell us very little about this division.
Retail sales and consumer spending, for example, have been stronger than expected. This most likely indicates the habits of high-income people with secure jobs who are working from home. They can spend – and that’s what they are doing.
High demand among these individuals helps to explain the strong sales of homes and autos. And they have even more reason to spend given the massive rebound in the stock market that has pushed their net worth closer to pre-epidemic levels.
TS Lombard chief economist Steve Blitz said that it has long been the maximum achievement of an industry that the 20% wealthiest Americans account for up to 80% of all discretionary spending. If that is the case now, they are making recovery better than they recover.
After the expiration of an additional $ 600 in federal unemployment benefits in July, millions of Americans are out of work, struggling to make ends meet, especially with no such luxury.
“This is a significant loss to those who are no longer being found,” Blitz said.
The loss of income for these Americans, and the catastrophe for airlines, hotels, restaurants, and retailers, could eventually filter into the broader economy and even damage the high-income and stock markets.
This month, a group of major airlines, hotels, mall operators and others have announced that they will permanently cut more jobs until Washington provides additional assistance. America’s jobless benefit claims have been up for four straight weeks, potentially another warning sign of trouble.
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The Federal Reserve, meeting this week to evaluate the economy, is still concerned enough that top central bankers demand more financial relief from Congress.
Generally too heady to advise lawmakers, the Fed has been surprisingly vocal because it is a matter of concern that it will hoist the flag until Congress puts more air on its back.
The wildfire in California, the nation’s largest economy state, is not helping. The fire has displaced many people and applied for a spike for unemployment benefits.
Nothing has changed in Washington so far. Democrats blocked a “skinny” Republican bill last week that provided some more aid to the economy. Democrats want a huge spending bill that Republicans have opposed.
With the 2020 election round coming in November, the prospect of another major financial aid package is diminishing by the day. Perhaps the only thing Congress will get to work on, analysts say, is a sudden drop in recovery.
However, this did not happen in August, and it does not appear that the economy will exit suddenly in September or so.
BMO Capital Markets chief economist Douglas Porter said, “As it would have been hard to believe just a few weeks ago, it is now entirely credible that we are leading the election without a new measure.”