“The steep decline in federal support for unemployed workers and heightened uncertainty will depress consumer confidence and spending and weigh on the broader economic recovery,” said Lydia Boussour, senior U.S. economist at Oxford Economics.
After enacting a massive financial rescue package in March, congressional Republicans and Democrats have failed to agree on allocating more aid to the unemployed and to struggling states and localities. President Donald Trump signed an executive order offering a stripped-down version of the unemployment benefit. At least 39 states have accepted or said that they would apply for federal grants that let them increase weekly benefits by $300 or $400. But it’s unclear how soon that money will actually get to people or how long it will last.
In the meantime, the economy, after a catastrophic fall in the April-June quarter, is likely expanding again. Home and auto sales have been strong. Stock prices have set record highs.
But a persistently high level of confirmed viral cases has damaged several industries, especially those involved with travel, tourism and entertainment, and is holding back growth. On Thursday, the government said roughly 1 million people applied for unemployment benefits last week — a historically high level that has prevailed for weeks.
The Conference Board, a business research group, reported this week that consumer confidence has tumbled to its lowest level since 2014. And in survey results released this week by the National Association for Business Economics, two-thirds of economists who were polled said they thought the economy remains in recession. Nearly half said they didn’t expect it to return to pre-pandemic levels until mid-2022.
