Economic Data Points to Pause in Recovery as Aid Programs Expire

Without a new government package, “we could go back into recession,” said Megan Greene, a senior fellow at the Harvard Kennedy School. “We built half a bridge, and we didn’t bother to finish it.”

Congress initially poured money into the economy to help it deal with the pandemic, but its relief efforts were intended to counter a short-term problem. One-time stimulus checks and expanded unemployment insurance bolstered household finances, but the weekly $600 benefits lapsed in late July. A program that was funneling loans to small businesses, preventing bankruptcies, ended in early August.

The pandemic, it has turned out, is around for the long haul.

Mr. Trump has signed executive orders and memorandums that could temporarily extend some relief programs, but he cannot fully revamp them unilaterally. His plan to continue more generous unemployment insurance, for instance, will only partly replace the former benefit — offering $300 or $400 extra per week instead of $600. Only 12 states have won approval so far to administer the benefit, and it will take time to get the money flowing. Once it does, the funds backing up the program could be exhausted quickly, depending on how many people are using them.

“The lack of emergency unemployment benefits in August is going to have, I think, devastating effects both for families and the economy as a whole,” said Ernie Tedeschi, an economist at Evercore who has tracked the effects of the supplemental benefits throughout the recovery.

Article source: https://www.nytimes.com/2020/08/21/business/economy/coronavirus-economic-recovery.html