Since early in the pandemic, the federal government has added $600 to the weekly unemployment checks that states send. That increase ends this week, and with Congress still haggling over the next steps, most states will not be able to offer nearly as much.
The extra federal aid helped keep Wally Wendt and his family afloat.
Wendt, 54, of Everett, Washington, was laid off from the fitness company where he worked for 31 years. The extra federal benefits helped him pay a loan to put a new roof on his house that he took out before the virus struck and the economy cratered.
The money also helps his daughter, who lost her restaurant job. With the boost, she can afford diapers, baby formula, rent, and utilities. Without it, Wendt said, his daughter and her two children might move in with him.
“The politicians need to get their ducks in a row,” Wendt said. “The pressure’s not on them, it’s on all of us blue-collar workers who are struggling to make a living.”
In addition to the end of the $600 payments, federal protections against evictions also are set to expire.
Standard unemployment benefits often leave recipients with poverty-level incomes, but they are sure to continue, even as states wrestle with diminishing unemployment trust funds.
Every state offers assistance for at least some unemployed workers based on a portion of their previous earnings. The maximum amounts vary widely, from $235 a week in Mississippi to $1,234 in Massachusetts. Benefits are available for as few as six weeks in Georgia and up to 28 weeks in Montana. Most states normally cut people off after 26 weeks.
The potential loss of benefits comes at a time of increasing pessimism about job prospects. Nearly half of Americans whose families experienced a layoff during the pandemic now believe those jobs are lost forever, according to a new poll from The Associated Press-NORC Center for Public Affairs Research.
Aside from the pandemic’s economic damage, the virus itself threatens to overwhelm parts of the country that have been relatively unscathed.
White House coronavirus response coordinator Dr. Deborah Birx warned in a television interview that the surge of cases in the South and Southwest could make its way north.
“What started out very much as a Southern and Western epidemic is starting to move up the East Coast, into Tennessee, Arkansas, up into Missouri, up across Colorado,” Birx told NBC’s “Today” show. She implored people to wear masks, wash hands, and keep at least 6 feet apart.
In Missouri, confirmed cases have risen sharply since Republican Gov. Mike Parson allowed the state to reopen in mid-June. The number of positive tests sets a record three days in a row this week.
Birx said health professionals have “called out the next set of cities” where they see early warning signs because if those cities make changes now they “won’t become a Phoenix.” Arizona’s sprawling capital has suffered a severe outbreak, though Birx said Friday the federal government was seeing encouraging declines in positive test results there and in San Antonio, which like much of Texas has been hard hit.
The governor of Vermont, where cases have been among the nation’s lowest, responded Friday by issuing an order requiring people to wear masks in public. “We are still in very good shape, but it is time to prepare,” Republican Gov. Phil Scott said. Also Friday, McDonald’s announced it would soon start requiring masks in its restaurants.
Masks continue to be a national flashpoint. Police in Green Bay, Wisconsin, were investigating death threats made against elected city officials over a new mandate requiring face coverings in public buildings. Indiana’s governor dropped a planned criminal penalty from the statewide face mask mandate that he signed Friday after objections from many law enforcement officials and some conservative legislators.
Sunbelt states that have been besieged in recent weeks are still struggling. Florida, for example, reported 135 new deaths and 12,000 new cases, pushing its total of identified infections past 400,000. In California, officials reported a record of 159 deaths Friday, bringing total deaths to around 8,200. California now has more than 435,000 confirmed cases.
Meanwhile, lawmakers in Washington were negotiating a new coronavirus relief bill as state and local governments, schools, businesses, and others pushed for a new dose of aid. Congressional Democrats have sought to keep the extra $600 in unemployment checks rolling. Republicans who control the Senate have proposed benefits worth 70% of what people made before.
The $600 weekly bonus is technically set to expire July 31, but the cutoff is effectively Saturday owing to how states process payments.
Other aspects of the enhanced benefits will continue, including coverage for some gig workers and freelancers who are usually ineligible for unemployment, as well as a 13-week extension of regular payments that the federal government is helping to subsidize.
Critics noted that the extra cash payments meant many workers were receiving more for not working than they did working — a possible disincentive for returning to the job. Supporters cast that as an acknowledgment that wages were too low and said the extra money was a chance for workers to build up a cushion in case they remained unemployed after benefits expire.
The federal government is offering interest-free loans to states that deplete their unemployment insurance trust funds, and 10 states have received them so far. But paying the U.S. back after a crisis can keep states from building up reserves. Pennsylvania just finished paying off its loans from the Great Recession.
Hawaii is one state that is preserving part of the boost, increasing unemployment checks by $100 a week for the rest of the year. To pay for it, the tourism-dependent state is using nearly one-fifth of its main pot of federal coronavirus aid.
Georgia is allowing people to earn more from part-time jobs while still receiving unemployment benefits. In most places, however, similar measures have not taken hold.
The New Hampshire Legislature, controlled by Democrats, approved a bill to increase the maximum payment by $100 weekly, to $527. Republican Gov. Chris Sununu vetoed it, saying that some of the details could have jeopardized federal funding.
In Arizona, Democrats have also pushed for adding $100 to the maximum weekly benefit of $240, but Gov. Doug Ducey, a Republican, deferred to Congress.
The CEO of Tesla TSLA, -6.34% and SpaceX explained in a Twitter TWTR, -2.34% thread that went viral on Friday afternoon that while he does support universal basic income, he believes that any coronavirus aid coming from government legislation will be tainted by special interests.
“Goal of government should be to maximize the happiness of the people,” he wrote. “Giving each person money allows them to decide what meets their needs, rather than the blunt tool of legislation, which creates self-serving special interests.”
He added that stimulus packages are “jammed to the gills with special interest earmarks,” and that he supports “direct payments to consumers” instead.
His words drew many derisive responses from readers pointing out that Musk’s own companies have received almost $5 billion in government subsidies. What’s more, Texas officials have reportedly voted to give Musk at least $14.7 million in property tax rebates if Tesla spends at least $1.1 billion on its proposed “gigafactory” near Austin.
“Elon Musk whose company Tesla and his wealth was possible thanks to government subsidies,” wrote one Twitter follower.
“Imagine spending months negotiating an agreement to line your pockets with $15 million in taxpayer money… and then turning around and criticizing giving $600/week to people who are unemployed during a once-in-a-century pandemic,” tweeted another in a comment that’s been liked more than 3,000 times.
Still, others bashed the tech billionaire — whose net worth was $66.6 billion on Friday afternoon — for weighing in on a stimulus bill with the potential to help millions of Americans keep their businesses open, buy food and avoid losing their homes. During the last round of stimulus checks, most Americans said they used the money to pay their bills, followed by putting it in their emergency savings and spending it on essentials like food.
What’s more, the extra $600 in unemployment benefit, which is set to lapse on July 31, on top of the nearly 30 million Americans who have already lost their jobs during the pandemic, may mean consumers will have even less money to spend in stores and online.
“Says the guy who can pay his f—ing bills,” wrote one Twitter user in response.
“We are barely surviving at our business and have gone to working 20 hour weeks to ration out the small amount of business we are getting,” wrote another respondent, who accused Musk of “tweeting from your ivory tower” with no regard for what most of the country has had to deal with to subsist during the pandemic.
Musk’s response to all of this? “Twitter sucks,” he tweeted, with a rose emoji.
Signs of trepidation over the lasting impact of the U.S. coronavirus pandemic are growing on Wall Street, fanned by resurgent case numbers, the prospect of a slower rebound in growth, and rising political uncertainty.
Traders wear masks as they work on the floor of the New York Stock Exchange as the outbreak of the coronavirus disease (COVID-19) continues in the Manhattan borough of New York, U.S., May 27, 2020. REUTERS/Lucas Jackson
As a U.S. equity rally stalled this week, investors poured a net $24.5 billion into bonds, the third-largest weekly inflows ever recorded, while pulling $3.8 billion out of stocks, according to BoFA Global Research. Gold drew its second-largest inflows on record, while investors socked nearly $41 billion away in cash.
Meanwhile, the dollar hit its lowest level in nearly two years, weighed down in part by growth-chasing investors cutting positions in U.S. assets in favor of allocations to Europe. In the bond market, yields on Treasury Inflation-Protected Securities (TIPS), which adjust for inflation - are near all-time lows.
“We are definitely concerned,” said Nick Maroutsos, Head of Global Bonds at Janus Henderson Investors. “I don’t think you can blindly buy assets. A lot of the value has been squeezed.”
Maroutsos said there was some “fear of missing out” in the market with the expectation that actions by the U.S. Federal Reserve can continue to keep risk assets elevated, and that investors were “looking to hedge some of their portfolio given the move in risk assets”.
He added that behavior “can certainly continue.”
The U.S. central bank has pledged unlimited financial asset purchases. While the vast majority of these purchases have been limited to U.S. Treasuries and mortgage-backed securities, the Fed’s pledge to bolster the corporate bond market has spurred a frenzy for bonds and stocks.
The Fed’s July 28-29 meeting could describe the turn the economy seems to be approaching. The U.S. economic outlook has darkened in the past month, according to a Reuters poll.
Investors are weighing coronavirus cases escalating in southern and western U.S. states, rising tensions between the U.S. and China, potential volatility stemming from the Nov. 3 presidential election, and the level of debt being built up to fight the effects of the virus.
Jeffrey Gundlach, chief executive officer of Doubleline Capital, which oversees $138 billion invested primarily in fixed income, said he was concerned about the level of debt being built up in the economy via multiple stimulus programs over the years.
He believes that will weigh on the dollar as the U.S. deficits grow. While the dollar may benefit the short term if there is equity weakness, “ultimately it weakens as the debt situation is really remarkably bad for a developed country.”
There are also concerns that the blistering rally in the S&P 500 from its March lows has been led by a small group of technology-related names. Facebook, Amazon, Apple, Microsoft, and Google, the five largest U.S. stocks, now account for 22% of the S&P 500’s market capitalization, analysts at Goldman Sachs said in a recent report.
The equity market’s leadership and frenzied buying by retail investors “is classic bear market rally activity,” said Gundlach, and feels similar to 1999 - which was prior to the dotcom bubble bursting.
However, it is “way worse because we don’t have the ability to cut interest rates” and have “used all the tools that are typically reserved for fighting economic problems,” he said.
Some are looking more positively abroad.
Gross domestic product growth in both the United States and Europe should take hits next year, according to Société Générale. Yet the firm projects a 5.2% rebound for EU growth in 2022, compared with a 2.5% bounce in the United States.
“Next year will be the year of recovery for Europe and East Asia, wherein the U.S. a vaccine won’t have the same impact because the virus is not contained,” said David Kelly, chief global strategist at JP Morgan Funds.
U.S. cases of the virus continue to increase at the fastest rate in the world.
“In the U.S. right now we are seeing a bit of ‘what does this mean?’” said Jim Schaeffer, head of leveraged finance at Aegon Asset Management. “We sold on the complete unknown and rallied on hope.”
"That extra money is basically keeping us afloat at this point."— Bloomberg QuickTake (@QuickTake) July 24, 2020
As benefits under the CARES Act expire, Americans left unemployed by the #Covid19 pandemic are contending with the reality that "it's going to suck" pic.twitter.com/q6dC8eLwga