US economy: Joe Biden does not have a magic wand to fix it

US economy: Joe Biden does not have a magic wand to fix it

by
But many economists and business leaders agree that no government assistance to individuals and small businesses can fix the economy until the underlying cause of the problems – the Covid-19 pandemic – has been defeated. At best, the combination of the $ 900 billion plan adopted in December and the plan of the president-elect can only help the economy continue to tread water until the pandemic is under control.

“It’s a very large package, but it’s about helping the economy stick together, as well as the end of the pandemic,” said Mark Zandi, chief economist at Moody’s Analytics.

Zandi and other economists believe that the gross domestic product, the broadest measure of the country’s economic activity, could rise if Biden gets its full package soon after taking office. But growth in jobs will be much more subdued.

The US economy lost 22 million jobs in March and April, ending the year with another 140,000 net job decline. Even with the 12.5 million jobs recovered in between, staff members at U.S. employers dropped nearly 10 million during the pandemic. Moody’s has predicted that the posts will only be restored in 2022, even if Biden gets its full package.

“We are growing a lot going forward, but it will take 18-24 months to get all the jobs back,” Zandi said. “A lot of people just can’t go back to work until the pandemic is in the rearview mirror.”

Solving the underlying problem

And unfortunately, the message from public health experts is clear: the pandemic is going to get worse before it gets better.
New cases, hospitalizations and deaths in the United States are at or near record highs. This could lead to renewed closure orders and business closures in many parts of the country, as imposed in other countries, especially with a new, more transmissible version of the virus. The vaccine now being rolled out is not expected to reach enough of the population to get most Americans back to normal life by the earliest summer.
This may mean that you return to economic activities more slowly than you expected, such as eating out at restaurants and traveling. The economy lost jobs in December for the first time since April due to high unemployment in leisure and hospitality businesses, as well as restaurants and bars. The stimulus can help many businesses and individuals go through the storm, but according to experts, it will not save everyone to get out of business.

“There’s not much you can do from an economic policy point of view if the pandemic continues to rage,” said Andrew Hunter, senior U.S. economist at Capital Economics. “Things look good for some time later this year, but it depends first on getting vaccines rolled out so things can return to normal.”

Biden promised to increase the vaccination efforts, which he said were “a gloomy failure so far”. But it is not clear how successful these efforts will be and how much it can be delayed by resistance by many members of the public to be vaccinated.

“We have a slower-than-expected effect of vaccines, and it really weighs the expectations on when we will return to pre-pandemic life,” Edada’s senior market analyst told Onada.

Business uncertainty

And the uncertainty is causing businesses, from retailers to airlines to banks, as they try to make plans, even businesses that have done well so far.

“The rules of the game keep changing. For a business person, it’s overwhelming,” Zandi said. “They are not going to feel that the coast is clear. The uncertainty will suppress the ability to go out and expand and grow. They are not going to hire more people because they do not know what lies ahead in the future. “It’s going to be a process. I do not think it’s like a light switch going on.”

The prevention of a rapid boost to the economy through the proposed stimulus package is also the fact that many businesses have already closed permanently due to the crisis and that permanent job losses are therefore increasing. The money that Biden is offering in direct aid to most American households, and that extensive and extensive unemployment benefits will help many families to withstand the crisis, but it will not repair all the damage done to the economy during the crisis.

“It takes much less time to destroy jobs than it does for the economy to create new jobs,” said Joel Prakken, chief economist at US IHS Markit. “I estimated that a third of the lost jobs will never come back. In their previous form.”

Will that be enough?

The money Biden proposed is just a little less than what was passed under the CARES law in March, but Biden made it clear last week that this is only the first step of what he will ask Congress to spend. This first package is more than twice as much as the $ 787 billion stimulus package passed shortly after Barack Obama and Biden entered office in 2009, in the depths of the Great Recession.

The money in the CARES law, passed at a time when more than 22 million Americans are losing their jobs, has a significant impact on the economy and households’ ability to withstand the economic crisis. Despite the economic upheaval, the number of individual bankruptcy supporters fell by 31% in 2020, to the lowest level since 1987, according to an analysis by the Equip for the American Bankruptcy Institute.

When will Americans see the help from Biden's emergency relief proposal? It depends on Congress

“Ongoing government assistance programs, moratoriums and loan deferrals have helped families and businesses meet the economic challenges of the Covid-19 pandemic over the past year,” said Amy Quackenboss, CEO of ABI.

But the support, as important as it was, did not end the economic crisis. Even while millions of people who are temporarily laid off are being recalled, there are 10.7 million people looking for work who cannot get it, 2.2 million more who want jobs but who stop looking and 6.2 million who only work part-time, even though they want a full-time job. Getting them back to work, according to experts, will take time, even with the stimulus.

And much of the help is up, or will run out soon. It is not clear how much of the $ 1.9 billion Biden is asking for will be approved by a divided Congress. IHS Markit claims that the final amount will probably be closer to $ 1 billion. Moody’s estimates it could be closer to $ 750 billion.

But the key to economic recovery depends less on the stimulus than on the state of the pandemic and when life returns to something that feels more normal for businesses and their customers.

“Deaths are likely to peak in late winter / early spring,” Prakken said. “It will probably be somewhere in the second half of the year that people will be more comfortable going out.”

.Source