On The Money: Economists flabbergasted after Congress leaves with no deal | Markets rise as the economy struggles | Retail sales slow in July
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THE BIG DEAL—Congress exits with no deal, leaving economists flabbergasted: A wide range of economists are expressing exasperation that Congress would leave town without first finishing work on a new coronavirus relief package that they say is critical to the country’s recovery and for millions depending on help from the government.
- More than 28 million Americans on some form of unemployment insurance lost a crucial source of income after a $600 weekly boost to those benefits lapsed last month.
- Those households now have far less money to cover basic expenses, including rent and home payments they can no longer forgo after the expiration of federal bans on evictions and foreclosures.
- While it could take weeks to see the effects of the lapse in aid, progressive economists in particular are raising alarms about the potential toll on unemployed Americans and those who depend on them.
“Let’s get money back into the economy. Let’s get it back into the pockets of working people in this country. They will pay their bills, they will spend it, and they will keep a roof over their family’s head and feed themselves,” said Michelle Holder, an economics professor at John Jay College.
Read more here.
VIRTUAL EVENT ANNOUNCEMENT – ON THE AGENDA: AFFORDABLE HOUSING
A place to call home has always been a basic need and yet the lack of safe, affordable housing remains an issue today. On the sidelines of the 2020 Conventions, The Hill will host discussions on what can be done to ensure all Americans have access to a safe and affordable home. Tuesday, August 18 at 1PM EDT former HUD Sec. Julián Castro and Rep. Suzan DelBene join us for the DNC; stay tuned for details on the RNC edition on Tuesday, August 25 at 1PM EDT.
LEADING THE DAY
Markets rise as the economy struggles; ‘It does not make sense’
The expression “stock markets are not the economy” may have never been truer.
The S&P 500, an index that tracks the country’s largest publicly traded companies, has all but erased its pandemic losses and closed within a fraction of a percentage point of its all-time high Thursday.
But far away from Wall Street, the economy on main streets in cities and towns across the country feel as if they are in tatters.
- Unemployment stands at 10.2 percent as thousands of businesses remain closed.
- Many of the jobs shed when businesses closed their doors for extended lockdowns have not come back, and the jobless rate remains at its highest level since the Great Depression.
Gene Goldman, chief investment officer at Cetera, says that equity markets are enjoying a V-shaped recovery even as the real economy is experiencing a slower, U-shaped recovery.
“It does not make sense,” he said.
The Hill’s Niv Elis breaks it down here.
The disconnect: While some of the economic data that’s come out has been positive, Goldman noted that a lot of the real time indicators are showing worrisome signs.
- Last month Yelp found that 26,000 restaurants had closed, almost 16,000 of them permanently.
- “Think about the workers who lost their jobs, whose benefits have been cut and who are uncertain about paying their rent,” he said. “Those are the consumers, they’re the ones who are supposed to be buying things.”
- Consumer confidence fell in 41 states over the course of July, according to Morning Consult, particularly in the South and West, and remains some 24 points below its pre-pandemic average.
What’s going on? A central reason for the spike is the Federal Reserve.
The Fed dropped interest rates to near zero and opened a slew of new lending facilities to keep financial markets afloat. Its balance sheet exploded from roughly $4.3 trillion in mid-March to about $7 trillion today.
“I think what’s driving the market is the incredible response from the Federal Reserve to provide a tremendous amount of liquidity to ensure the smooth functioning of markets,” said Michael Arone, chief investment strategist for State Street Global Advisors.
Big Tech also plays a role: Just five companies — Amazon, Apple, Facebook, Netflix and Google parent Alphabet — make up about a quarter of the S&P 500’s value.
The fact that those tech giants have benefited extraordinarily from the pandemic hides weakness elsewhere.
July retail sales slow to 1.2 percent, below expectations: Retail sales in July grew by 1.2 percent, about half the pace economists expected, and well below their June bump of 8.4 percent, according to Census Bureau data released Friday.
- A 1.2 percent drop in autos and auto parts helped drag down the total figure.
- All in all, sales remained just slightly below their first quarter levels, having fallen 0.2 percent during the second quarter.
- The data showed that non-store retailers’ sales have spiked in the past year, increasing 24.7 percent, while food and beverage stores have seen sales rise 11.1 percent in the same time period.
Niv walks us through the report here.
GOOD TO KNOW
- Former Federal Reserve Chair Janet YellenJanet Louise YellenOn The Money: Economists flabbergasted after Congress leaves with no deal | Markets rise as the economy struggles | Retail sales slow in July Janet Yellen briefed Biden on economic issues On The Money: Senate leaves until September without coronavirus relief agreement | Weekly jobless claims fall below 1 million for first time since March | Trump says no Post Office funding means Democrats ‘can’t have universal mail-in voting’ MORE was among those economic experts who briefed presumptive Democratic presidential nominee Joe BidenJoe BidenOn The Money: Economists flabbergasted after Congress leaves with no deal | Markets rise as the economy struggles | Retail sales slow in July Congress exits with no deal, leaving economists flabbergasted Trump touts NYC police union endorsement: ‘Pro-cop all the way’ MORE and his newly chosen running mate, Sen. Kamala HarrisKamala HarrisOn The Money: Economists flabbergasted after Congress leaves with no deal | Markets rise as the economy struggles | Retail sales slow in July Trump touts NYC police union endorsement: ‘Pro-cop all the way’ USPS workers union endorses Biden, citing threat to postal service ‘survival’ MORE (D-Calif.), on Thursday.
- The IRS on Friday announced a new Sept. 30 deadline for people who don’t typically file tax returns to claim $500 in stimulus money for their children.
- President TrumpDonald John TrumpUPS, FedEx shut down calls to handle mail-in ballots, warn of ‘significant’ problems: report Controversial GOP Georgia candidate attempts to distance from QAnon Trump orders TikTok parent company to sell US assets within 90 days MORE on Friday said he will approve billions of dollars in funding for the U.S. Postal Service (USPS) as part of a coronavirus relief package if Democrats make concessions on certain White House priorities.
- Stock markets on Friday closed flat, nearly unchanged from Thursday’s closing levels, amid little signs of progress from negotiators on another coronavirus stimulus deal.
- Facebook on Friday chastised Apple for not waiving its revenue-sharing fee, saying that it has hurt small businesses during the coronavirus pandemic.
- A state appeals court in California has ruled that Amazon could be held liable for injuries due to defective products sold on their marketplace, similar to other traditional retailers, according to Reuters.
ODDS AND ENDS