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What Economists Fear Will Happen Without More Unemployment Aid
I remember back in January/February thinking that if we could have a housing bubble burst and effect the world economy what would a pandemic do? So far it's been worse than I imagined. I wonder how far down this hole we'll fall.
"The economists also said we’re more likely to see job losses than workers returning to the workforce if Congress decides not to extend the unemployment supplement in any form.
That might seem counterintuitive — how could a policy that seems likely to encourage more people to return to work actually result in more job losses? But recent research has indicated that the $600-per-week payment has been allowing jobless workers to continue to spend money as they would normally, at a moment when hiring still isn’t back to normal in many industries. And if losing the extra money causes millions of people to cut back their spending, businesses could suffer and lay off workers as a result. “The net effect on jobs is hard to say — on the one hand, lower spending implies some job losses, but that should be offset to some extent by more people returning to work and finding new jobs,” said Eric Swanson, a professor at the University of California, Irvine.
We also asked the economists about what might cause their worst-case predictions for fourth-quarter GDP to come to life. We gave them a bunch of different scenarios and asked them to weight which were most likely to bring about their nightmares. As a group, they said a lack of fiscal stimulus loomed almost as large as a bad second wave of COVID-19 infections. Notably, a lack of fiscal stimulus was a far greater concern than when we last asked the question in mid-June, although the level of worry about a second wave of coronavirus barely budged."
I remember back in January/February thinking that if we could have a housing bubble burst and effect the world economy what would a pandemic do? So far it's been worse than I imagined. I wonder how far down this hole we'll fall.
"The economists also said we’re more likely to see job losses than workers returning to the workforce if Congress decides not to extend the unemployment supplement in any form.
That might seem counterintuitive — how could a policy that seems likely to encourage more people to return to work actually result in more job losses? But recent research has indicated that the $600-per-week payment has been allowing jobless workers to continue to spend money as they would normally, at a moment when hiring still isn’t back to normal in many industries. And if losing the extra money causes millions of people to cut back their spending, businesses could suffer and lay off workers as a result. “The net effect on jobs is hard to say — on the one hand, lower spending implies some job losses, but that should be offset to some extent by more people returning to work and finding new jobs,” said Eric Swanson, a professor at the University of California, Irvine.
We also asked the economists about what might cause their worst-case predictions for fourth-quarter GDP to come to life. We gave them a bunch of different scenarios and asked them to weight which were most likely to bring about their nightmares. As a group, they said a lack of fiscal stimulus loomed almost as large as a bad second wave of COVID-19 infections. Notably, a lack of fiscal stimulus was a far greater concern than when we last asked the question in mid-June, although the level of worry about a second wave of coronavirus barely budged."
