Nixse
0

Trump Says the US Economy Thrives, But How True Is It?

US President Donald Trump accredits the quick economic recovery in the country to the success of measures taken by his administration. While he is right about the economic recovery, the sentiment doesn’t represent the whole situation in the US right now.

Last week,  the US Federal Reserve Chair, Jerome Powell testified on Capitol Hill about the recovery. He insisted that the economy has two sides with one showing more strength than the other.

According to reported figures, the economy is recovering at a faster rate than the Fed and other economists had anticipated. Out of the 22 million workers who were rendered jobless by containment measures last spring, about 10.6 million are now back at work.

The Atlanta Fed’s GDP Now model, shows that the GDP, which represents the broadest measure of the economy, will perform better at an annualized rate of 32% in Q3 2020.

Improvement Moving at a Slow Pace

Many shops have remained closed even with gradual reopening measures. While 10.6 million jobs have been recovered, 11.5 million people rendered unemployed by the pandemic are still jobless.

Next week Congress will expand its fiscal stimulus provided to the airline industry to prevent more than 100,000 people losing their jobs. The airline industry felt a boost from the CARES Act fiscal package allocation of $50 billion in bailout money.

Additionally, the sugar rush from initial stimulus packages by Congress has faded away. Moreover, without further intervention, the growth that has been achieved so far could collapse. People and businesses may have to face a long and hard winter. Especially, if the government fails to implement additional fiscal stimulus support.

“The risk going forward is that people are spending now. This is because they have saved money in the bank even though they are unemployed,” stated Powell in his testimony.

Once they run of money to spend, people will be more inclined to save. Thus, rendering a huge blow to the economic recovery, which is relying on spending as its growth propeller.

In the retail sector, the biggest bounce back recorded in May indicates that while Americans are spending more and more, the rate is slow and slowing even further.

States’ Funds are Running Out

In Washington, unemployment people stopped receiving the supplemental $600 weekly payout. Which after funds ran out with no further deal from Congress.

President Trump’s executive order to kick start benefits of $400 per week by using funds from the Federal Emergency Agency (FEMA) hit a dead end after FEMA claimed that several states have already used up their allocation in Fiscal measures.

The Paycheck Protection Program (PPP) formed to help businesses weather the worst of the economic crisis. However, it is also running out of funds. Thus, leaving many businesses worried about how to stay open without fiscal support.

Meanwhile, China, the second-largest economy has also been reporting positive economic news. Especially after registering growth in both industrial/manufacturing and domestic retail sectors.  Little to no growth in the global economy is still expected in the fourth quarter of 2020.



You might also like
Leave A Reply

Your email address will not be published.