A snapshot of the economy after the election
OnNov. 8, U.S. news outlets called the 2020 election, but investors had already voted with their money. After theworstweek since March, stocks soared electionweek and recouped all of the previousweek’s losses— and then some. The S&P 500 soared 7.3%, the best presidential electionweek since 1932.
Wall Street interpreted a Joe Biden presidency, a Republican-controlled Senate and a DemocraticHouse as a win for corporate America, because with divided government, the thinking goes, it is unlikely that there are going to be enough votes to enact a tax increase on corporations or on the top 2% of individuals. Any potential increase in regulation for the energy, financial services or health care sectors could be outweighed by a reversal of the tradewarwith China.
While gridlock might be good for stock investors, what about the overall economy? On that front, the news is mixed. As Federal Reserve Chair Jerome Powell noted two days after the election, “the path of the economy will depend significantly on the course of the virus,” and the recent rise in cases “is particularly concerning.” Most analysts agree that the first round of stimulus helped the economy recover towhere it is today, which iswhy the next round is desperately needed.
Fresh off his election win, SenateMajority Leader MitchMcConnell said Congress should focus its energy on approving a new coronavirus stimulus bill “by the end of the year,” and itwould possibly “domore for state and local governments.”
Meanwhile, the October employment reportwas a good one. The economy added 638,000 jobs and the unemployment rate dropped a full percentage point to 6.9%, as more people entered the labor force and got jobs. With the sixth consecutive month of gains, the labor market has recouped about 12 million of the 22 million jobs lost due to the pandemic.
But there are still problems, including:
■ The pace of job growth is slowing down.
■ There are still 10.1 million fewer jobs than in February. The losses are still 15% worse than those experienced in 2008-09.
■ As the number ofCOVID-19 cases rises, there could be limits to the number of jobs added this winter, especially in leisure and hospitality. Nine percent of businesses planned to lay offworkers during Q4 due to the outbreak, according to a Conference Board survey last month.
■ Long-term unemployment (out ofwork for more than 27weeks) jumped by 1.2 million to 3.6 million, representing about a third of those unemployed. Theseworkers “tend to get lower paying jobs once they are reemployed, and suffer more mental and physical health problems than thosewho are only unemployed for a short period of time,” says Grant Thornton Chief Economist Diane Swonk.
The number of people who areworking part time instead of full time for economic reasons jumped by 383,000 to 6.7 million.
Hopefully, lawmakers will see the danger that lurks. In addition to the $600 perweek extra benefit, which expired at the end of July, here are the CARESAct provisions that are slated to expire at the end of 2020:
■ Enhanced unemployment benefits (selfemployed/gigworkers)
Extended unemployment insurance benefits (26 to 39weeks)
■ Eviction ban
■ Mortgage relief and forbearance on federally insured home loans
■ Student loan forbearance on federal loans
■ Expanded 401 (k) hardship loans and withdrawals