On The Money: Fed chief says full recovery from recession ‘unlikely’ until coronavirus contained | Congress set for fight over expiring unemployment relief | CBO: COVID-19 emergency bills will add $2.4 trillion to deficit
Happy Tuesday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
THE BIG DEAL—Fed chief: Full recovery from recession ‘unlikely’ until coronavirus contained: Federal Reserve Chairman Jerome Powell told lawmakers Tuesday that a full recovery from the pandemic-driven recession is “unlikely” until Americans no longer fear contracting COVID-19 despite recent strong economic data.
In his testimony before the Senate Banking Committee on Tuesday, the Fed chief warned that the U.S. economy will continue to suffer as long as the coronavirus lingers.
“Recently, some indicators have pointed to a stabilization, and in some areas a modest rebound, in economic activity. With an easing of restrictions on mobility and commerce and the extension of federal loans and grants, some businesses are opening up, while stimulus checks and unemployment benefits are supporting household incomes and spending,” Powell said.
“That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery,” he continued. “Until the public is confident that the disease is contained, a full recovery is unlikely.”
Signs of recovery: Powell’s appearance before the Banking Committee comes after a series of surprisingly strong economic data has boosted hopes of a quicker-than-expected rebound from the recession caused by COVID-19.
- The U.S. added 2.5 million jobs in May as 2.7 million workers returned from temporary layoffs to stores that had recently been allowed to reopen, according to the Labor Department.
- Retail and food service sales also surged by 17.7 percent in May as states slowly peeled back restrictions imposed to slow the spread of COVID-19.
May’s rebound in hiring and consumer spending has fueled hopes that the U.S. has already reached the nadir of the pandemic-driven economic collapse. But Powell has consistently warned that the unprecedented scale and speed of the downturn, along with its unique toll on the most vulnerable Americans, will take months if not years to reverse.
I have more on Powell’s appearance here.
Read more: Retail sales soar 17 percent in May after pandemic-driven April plunge
On tap tomorrow
- U.S. Trade Representative Robert Lighthizer testifies before the House Ways and Committee on the Trump administration’s 2020 trade agenda at 10 a.m.
- Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee during a virtual hearing on the bank’s semi-annual monetary policy report at 12 p.m.
- The House Small Business Committee holds a virtual hearing entitled “Paycheck Protection Program: Loan Forgiveness and Other Challenges” at 1 p.m.
- U.S. Trade Representative Robert Lighthizer testifies before the Senate Finance Committee on the Trump administration’s 2020 trade agenda at 3 p.m.
LEADING THE DAY
Congress set for fight over expiring unemployment relief: Congress is under pressure to extend expiring unemployment benefits as COVID-19 infections continue to rise in some states and as jobless rates remain at levels not seen in decades.
The expanded benefits included in March’s CARES Act helped tens of millions of workers get through coronavirus-related lockdowns but are set to go away in August.
- Republicans object to continuing to add an extra $600 to weekly benefits for all unemployment recipients, noting that it could make unemployment more lucrative than working for a large percentage of recipients. That, they say, could provide a disincentive for people to return to work as the economy reopens.
- But Democrats are worried that cutting or reducing the benefit would leave poor people without a safety net.
The Hill’s Niv Elis and Naomi Jagoda explain here.
- Lawmakers agreed to increase weekly unemployment benefits by $600 across the board in the CARES Act because that amount is the difference between the average weekly wage and the average weekly state unemployment benefit.
- Some Republicans have been criticizing the boost as too generous since before the CARES Act became law. The $600 per week increase is currently scheduled to expire on July 31, and its fate is set to be one of the key questions facing lawmakers and the administration when they negotiate a subsequent coronavirus relief package.
The danger: A Friday report from the Federal Reserve noted that recipients could find themselves in a dire situation without the expanded benefits.
“The supplementary UI [unemployment insurance] will end this summer. At that point, it will be difficult for many families to meet their financial commitments — rent, food, utilities, and other payments — if the economic downturn continues and the benefits are not renewed,” the report said.
- GOP lawmakers also say that the economy has been improving, requiring a different approach to unemployment benefits. “States are reopening, employment recently turned positive, and we need to shift our focus to helping people safely return to work, making sure businesses are able to come back quickly and put the country back on a path to economic growth,” Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said during a hearing last week.
- But Democrats say that now isn’t the time to let up on federal assistance. House Democrats last month passed a bill that would extend the $600 weekly increase until Jan. 31.
- Lawmakers are also considering some type of “return to work” bonus that allows people to keep receiving some or all of the boost to unemployment benefits for a period of time after they start working again.
CBO: COVID-19 emergency bills will add $2.4 trillion to deficit: The four COVID-19 emergency relief bills passed in March and April will add a total of $2.4 trillion to the deficit, according to a new report by the nonpartisan Congressional Budget Office (CBO).
The latest figures show the bulk of the deficit increase coming from the CARES Act, the March bill that included stimulus checks, increases to unemployment insurance, forgivable small business loans, and other major supports for business.
- That law alone accounted for $1.72 trillion in deficit increases expected over a decade.
- Behind that was the April law extending the small business loans program, called the Paycheck Protection Program, which CBO estimated would add another $483 billion to the deficit.
- The two earlier bills, which focused on the health care response and expanding paid leave, cost $8 billion and $192 billion, respectively.
Niv breaks it down here.
GOOD TO KNOW
- The IRS on Tuesday alerted nursing homes that coronavirus stimulus checks generally belong to residents and cannot be seized by these facilities.
- Stocks posted major gains on Tuesday after data showed retail sales jumped by a record last month.
- The U.S. fell in the Institute for Management Development’s (IMD) World Competitiveness ranking — an annual report on the world’s economies — for the second consecutive year.
- Giving to U.S. charities in 2019 reached one of its highest levels on record, according to a report’s findings announced Tuesday that provide a look into the giving landscape prior to the coronavirus crisis.
- Lawmakers in both chambers are looking for ways to assist the energy industry as the economic fallout hits fossil fuels and renewables alike.
- The European Commission said Tuesday that it is launching two investigations into Apple’s App Store and Apple Pay regarding whether the company is violating the European Union’s (EU) competition rules.