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    Biden's Spending Plans Could Start to Tackle Inequality

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    The Biden administration is relying on Congress instead of just the Fed to fix the economy. That mix could lead to a less wealth-unequal future.The coronavirus pandemic has threatened to rapidly expand yawning gaps between the rich and the poor, throwing lower-earning service workers out of jobs, costing them income, and limiting their ability to build wealth. But by betting on big government spending to pull the economy back from the brink, United States policymakers could limit that fallout.The $1.9 trillion economic aid package President Biden signed into law last month includes a wide range of programs with the potential to help poor and middle-class Americans to supplement lost income and save money. That includes monthly payments to parents, relief for renters and help with student loans.Now, the administration is rolling out additional plans that would go even further, including a $2.3 trillion infrastructure package and about $1.5 trillion in spending and tax credits to support the labor force by investing in child care, paid leave, universal prekindergarten and free community college. The measures are explicitly meant to help left-behind workers and communities of color who have faced systemic racism and entrenched disadvantages — and they would be funded, in part, by taxes on the rich.Forecasters predict that the government spending — even just what has been passed so far — will fuel what could be the fastest annual economic growth in a generation this year and next, as the country recovers and the economy reopens from the coronavirus pandemic. By jump-starting the economy from the bottom and middle, the response could make sure the pandemic rebound is more equitable than it would be without a proactive government response, analysts said.That is a big change from the wake of the 2007 to 2009 recession. Then, Congress and the White House passed an $800 billion stimulus bill, which many researchers have concluded did not do enough to fill the hole the recession left in economic activity. Lawmakers instead relied on the Federal Reserve’s cheap-money policies to coax the United States’ economy back from the brink. What ensued was a halting recovery marked by climbing wealth inequality as workers struggled to find jobs while the stock market soared.“Monetary policy is a very aggregated policy tool — it’s a very important economic policy tool, but it’s at a very aggregated level — whereas fiscal policy can be more targeted,” said Cecilia Rouse, who oversees the White House Council of Economic Advisers. In the pandemic crisis, which disproportionately hurt women of all races and men of color, she said, “If we tailor the relief to those who are most affected, we are going to be addressing racial and ethnic gaps.”From its first days, the pandemic set the stage for a K-shaped economy, one in which the rich worked from home without much income disruption as poorer people struggled. Workers in low-paying service jobs were far more likely to lose jobs, and among racial groups, Black people have experienced a much slower labor market rebound than their white counterparts. Globally, the downturn probably put 50 million people who otherwise would have qualified as middle class into lower income levels, based on one recent Pew Research analysis.But data suggest the U.S. policy response — including relief legislation that passed last year under the Trump administration — has helped mitigate the pain.“The CARES Act to the American Rescue Plan have helped to support more households than I would have imagined,” Charles Evans, the president of the Federal Reserve Bank of Chicago, told reporters this month during a call, referring to the pandemic relief packages passed in early 2020 and early 2021.Wealth has recovered nearly across the board after slumping early last year, foreclosures have remained low, and household consumption has been shored up by repeated stimulus checks.While the era has been fraught with uncertainty and people have slipped through the cracks, this downturn looks very different for poorer Americans than the post-financial crisis period. That recession ended in 2009, and America’s wealthiest households recovered precrisis wealth levels by 2012, while it took until 2017 for the poorest to do the same.At a food bank in Phoenix last month. The $1.9 trillion economic aid package signed into law includes a wide range of programs with the potential to help poor and middle-class Americans.Juan Arredondo for The New York TimesThe government’s policy response is driving the difference. In the 2010s, Republicans cited deficit worries and curtailed spending early, at a time when the economy remained far from healed after the worst downturn since the Great Depression. Interest rates were already near zero and not offering much of an economic lift, so the Fed engaged in several rounds of large-scale bond purchases to try to bolster the economy.The Fed policies did help. But low rates and huge bond-buying bolstered the economy slowly, and by first increasing prices on financial assets, which rich households are much more likely to own. As companies gain access to cheap capital to expand and hire, the workers who secure those new jobs have more money to spend, and a happy cycle unfolds.By 2019, that prosperous loop had kicked into gear and unemployment had dropped to half-century lows. Black and Hispanic as well as less-educated workers were working in greater numbers, and wages at the bottom of the income distribution had begun to steadily climb.Poverty fell, and there were reasons to hope that if that had continued, income inequality — the gap between how much the poor and the rich earn each year — might soon decline. Lower income inequality could, in theory, lead to lower wealth inequality over time, as households have the wherewithal to save more evenly.But getting there took nearly a decade and when the pandemic hit in 2020, it almost certainly disrupted the trend. The data are released on a lag.As those divergent trends between labor and capital played out, the rich rebuilt their savings — which are heavily invested in stocks and businesses — much faster. Poorer households eventually reaped benefits as the years wore on and people landed jobs. The bottom half of America’s wealth holders ended up better off than they had been before the crisis, but farther behind the rich.At the start of 2007, the bottom half of the wealth distribution held 2.1 percent of the nation’s riches, compared to 29.7 percent for the top 1 percent. By the start of 2020, the bottom half had 1.8 percent, while the top 1 percent held 31 percent.Researchers debate whether monetary policy actually worsens wealth divides in the long run — especially since there’s the hairy question of what would have happened had the Fed not acted — but monetary policymakers generally agree that their policies can’t stop a pre-existing trend toward ever-worse wealth inequality.By offering a more targeted boost from the very start of the recovery, fiscal policy can. Or, at a minimum, it can prevent wealth gaps from deepening so much.Monetary policy “is naturally trickle-down,” said Joseph Stiglitz, an economist at Columbia and Nobel laureate. “Fiscal policy can work from the bottom and middle up.”That’s what the Biden administration is gambling on. Paired with packages from December and last April, Congress’s recent package will bring the amount of economic relief that Congress has approved during the pandemic to more than $5 trillion. That dwarfs the amount spent in the last recovery.The legislation is a mosaic of tax credits, stimulus checks and small-business support that could leave families at the lower end of the income and savings distribution with more money in the bank and, if its provisions work as advertised, with a better chance of returning to work early in the recovery.There is no guarantee Mr. Biden’s broader economic proposals, totaling about $4 trillion, will clear a narrowly divided Congress. Republicans have balked at his plans and this week offered a counterproposal on infrastructure that is only a fraction the size of what Mr. Biden wants to spend. A bipartisan group of House moderates is pushing the president to finance infrastructure spending through an increased gas tax or something similar, which hits the poor harder than the rich.Still, the president’s new proposals could have long-term effects, working to retool workers’ skills and lift communities of color in hopes of putting the economy on more equal footing. The president is set to outline his so-called American Family Plan, which is focused on the work force, before his first address to a joint session of Congress next week.While details have yet to be finished, programs like universal prekindergarten, expanded subsidies for child care and a national paid leave program would be paid for partly by raising taxes on investors and rich Americans. That could also affect the wealth distribution, shuffling savings from the rich to the poor.The plan, which must win support in a Congress where Democrats have just a narrow margin, would raise the top marginal income tax rate to 39.6 percent from 37 percent, and raise taxes on capital gains — the proceeds of selling an asset, like a stock — for people making more than $1 million to 39.6 percent from 20 percent. Counting in an Obamacare-related tax, the taxes they pay on profits would rise above 43 percent.If the Biden package helps a wide swath of people to get back to earning and saving money faster this time, there’s hope that it might set the economy on a different trajectory.Jim Wilson/The New York TimesThe new policies will not necessarily cut wealth inequality, which has been on an inexorable upward march for decades, but they could keep poorer households from falling behind by as much as they would have otherwise.Betting big on fiscal policy to return the economy to strength is a gamble. If the economy overheats, as some prominent economists have warned it could, the Fed might have to rapidly lift interest rates to cool things down. Rapid adjustments have historically caused recessions, which consistently throw vulnerable groups out of jobs first.But administration officials have repeatedly said the bigger risk is underdoing it, leaving millions on the labor market’s sidelines to struggle through another tepid recovery. And they say the spending provisions in both the rescue package and the infrastructure could help to fix longstanding divides along racial and gender lines.“We think of investment in racial equity, and equity in general, as good policy, period, and integral to all the work we do,” Catherine Lhamon, a deputy director of the Domestic Policy Council, said in an interview. More

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    Biden Highlights Small-Business Help, as Problems Persist With Lending Program

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    President Biden visited a Black-owned flooring company as he continued his weeklong push to highlight the $1.9 trillion economic relief package.President Biden dropped by a flooring company in the Philadelphia suburbs on Tuesday to promote an assortment of measures in his $1.9 trillion aid package that are aimed at helping small employers and their workers endure the pandemic’s economic shocks.But Mr. Biden’s most immediate and sweeping small-business initiative — changes he made last month to the Paycheck Protection Program — has been mired in logistical challenges. With the relief program scheduled to end in just two weeks, the effect of his modifications will be blunted unless Congress extends it.Last month, Mr. Biden abruptly altered the rules of the $687 billion program to make business owners who employ only themselves eligible for more money. The move was intended to address a clear racial and gender disparity in the relief effort: Female and minority owners, who are much more likely to run tiny businesses than larger ones, were disproportionately hobbled by an earlier rule that based the size of sole proprietors’ loans on their annual profit.Many companies were shut out of the program because of that restriction, while others got loans as small as $1. The administration switched to a more forgiving formula that lets those businesses instead use their gross income, a change that significantly increased the money available to millions of business owners. Its implementation, though, has been a mess.The program’s government-backed loans are made by banks. The largest lender, JPMorgan Chase, refused to make the change, saying it lacked the time to update its systems before March 31, the program’s scheduled end date. The second-largest lender, Bank of America, decided to update all of its applications manually, causing anxiety and confusion among its borrowers. Wells Fargo released its revised application on Tuesday and told borrowers with pending applications that they had just three days to reapply using the new form.Compounding the problem is that Mr. Biden’s change was not retroactive, which has prompted backlash from the hundreds of thousands of borrowers who got much smaller loans than they would now qualify for. Many have used social media or written to government officials to vent their anger.JagMohan Dilawri, a self-employed chauffeur in Queens, got a $1,900 loan in February. Under the new rules, he calculates that he would have been eligible for around $15,000. That wide gulf frustrated Mr. Dilawri, who has struggled to keep up on his mortgage, car loan and auto insurance payments since the pandemic took hold.“When the Biden administration came, they said, ‘We will be fair with everyone,’” he said. “But this is unfair.”Officials at the Small Business Administration, which manages the program, said only Congress could fix that disparity. Absent legislative action, loans that were completed before the rule was revised “cannot be changed or canceled,” said Matthew Coleman, an agency spokesman.On Tuesday, the Senate confirmed Mr. Biden’s nominee to run the Small Business Administration, Isabel Guzman, by an 81-to-17 vote.Despite the concerns, Mr. Biden was met with praise in Chester, Pa., when he visited Smith Flooring, a Black-owned business that supplies and installs flooring. White House officials said the shop cut payroll over the last year, from 22 union employees to 12, after revenues declined by 20 percent during the pandemic. It has survived, the officials said, thanks in part to two rounds of loans from the Paycheck Protection Program, which Congress established last year during the Trump administration to help small businesses.“This is a great outfit. This is a union shop,” Mr. Biden said in brief remarks. Its employees, he said, “work like the devil, and they can make a decent wage, a living wage.”The owners of Smith Flooring, Kristin and James Smith, secured their second loan from the program as part of one of the Biden administration’s changes, which created a two-week exclusive period for certain very small businesses to receive loans. They thanked Mr. Biden for his efforts and for visiting Chester.Mr. Biden’s aid bill, signed last week, added $7 billion to the program and funded others to help struggling businesses, including a $28 billion grant fund for restaurants. The law also set aside additional money for other relief efforts run by the Small Business Administration, including a long-delayed grant program for music clubs and other live-event businesses, which the agency said would start accepting applications early next month.Lenders are scrambling to carry out the administration’s changes to the Paycheck Protection Program and finish processing a flood of applications before March 31. The American Institute of Certified Public Accountants called the deadline “unrealistic,” and 10 banking groups sent a letter to lawmakers urging Congress to give them more time.Advocacy groups are also calling, with increasing urgency, for both an extension and a fix to make the rule change for sole proprietors retroactive.Mr. Biden met with the owners of Smith Flooring, Kristin and James Smith, in Chester, Pa., on Tuesday.Doug Mills/The New York Times“We absolutely need those changes,” said Ashley Harrington, the federal advocacy director at the Center for Responsible Lending. In December, Congress made retroactive changes to Paycheck Protection Program loans for farmers that allowed those borrowers to recalculate and increase previously finalized loans..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.“To have that change be made for one group and not be made for another — especially for a group that has so many Black and Latino business owners that have struggled so much in this crisis — really raised alarms and red flags for us,” Ms. Harrington said.Some key Democratic lawmakers said they were willing to extend the date. Representative Nydia M. Velázquez, a New York Democrat who leads the House Small Business Committee, said she was working with the Small Business Administration and congressional Republicans “to find a path forward, whether that be through agency action or additional legislation.”“For those sole proprietors who applied before the new rules took effect, we understand their concerns and are eager to work with Congress to resolve them,” said Bharat Ramamurti, the deputy director of the National Economic Council and the White House’s point person on the relief program.Mr. Ramamurti said that “tens of thousands” of loans had been approved by around 4,000 lenders using the new formula, and that some large lenders — including the online lender Biz2Credit and two banks, Cross River Bank and Customers Bank, that make loans for dozens of partner companies — said they had successfully made the needed updates.But many applicants are struggling. Chase’s refusal to make the change provoked outrage on social media from its customers. “What a slap in the face,” one tweeted at the bank. “Please make this right,” another begged.And some Bank of America customers are mired in confusion over the bank’s process, which required loan seekers to apply in writing for an incorrect amount — one that used the older formula — and rely on the bank’s staff to correct their applications by hand.Asim Khan, an environmental consultant in Ann Arbor, Mich., has been trying for two weeks to get his Bank of America application untangled. He has spent hours on the phone and on hold. “I’ve had two reps tell me they’ve seen it work for people, but yet they can’t make it work for me,” he said. “It’s all super clumsy.”Bill Halldin, a Bank of America spokesman, said the bank was “working with each individual client to manually update their loan information, which is the best way for us to help them take advantage of the recently announced rule change.”While the program still has two weeks left, the big banks are already shutting down. Bank of America stopped accepting new applications last week, and Chase plans to close its application system on Friday. More

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    How the U.S. Got It (Mostly) Right in the Economy’s Rescue

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanBiden’s AddressWhat to Know About the BillAnalysis: Economic RescueBenefits for Middle ClassShoppers at a mall in Los Angeles. Consumer spending is nearly back to its prepandemic level.Credit…Mark Abramson for The New York TimesAnalysisHow the U.S. Got It (Mostly) Right in the Economy’s RescueThough the recession has been painful, policymakers cushioned the pandemic’s blow and opened the way to recovery.Shoppers at a mall in Los Angeles. Consumer spending is nearly back to its prepandemic level.Credit…Mark Abramson for The New York TimesSupported byContinue reading the main storyMarch 15, 2021Updated 2:31 p.m. ETWhen the coronavirus pandemic ripped a hole in the economy a year ago, many feared that the United States would repeat the experience of the last recession, when a timid and short-lived government response, in the view of many experts, led to years of high unemployment and anemic wage growth.Instead, the federal government responded with remarkable force and speed. Within weeks after the virus hit American shores, Congress had launched a multitrillion-dollar barrage of programs to expand unemployment benefits, rescue small businesses and send checks to most American households. And this time, unlike a decade ago, Washington is keeping the aid flowing even as the crisis begins to ease: On Thursday, President Biden signed a $1.9 trillion aid bill that will pump still more cash into households, businesses, and state and local governments.The Federal Reserve, too, acted swiftly, deploying emergency tools developed in the financial crisis a decade earlier. Those efforts helped safeguard the financial system — and the central bank has pledged to remain vigilant.The result is an economy far stronger than most forecasters expected last spring, even as the pandemic proved much worse than feared. The unemployment rate has fallen to 6.2 percent, from nearly 15 percent in April. Consumer spending is nearly back to its prepandemic level. Households are sitting on trillions of dollars in savings that could fuel an epic rebound as the health crisis eases.Yet not everyone made it into the lifeboats unscathed, if at all. Millions of laid-off workers waited weeks or months to begin receiving help, often with lasting financial consequences. Aid to hundreds of thousands of small businesses dried up long before they could welcome back customers; many will never reopen. Long lines at food banks and desperate pleas for help on social media reflected the number of people who slipped through the cracks.“The damage that has been done has occurred in a disparate fashion,” said Michelle Holder, a John Jay College economist who has studied the pandemic’s impact. “It’s occurred among low-income families. It’s occurred among Black and brown families. It’s certainly occurred among families that did not have a lot of resources to fall back on.”For many white-collar workers, Dr. Holder said, the pandemic recession may one day look like a mere “bump in the road.” But not for those hit hardest.“It wasn’t just a bump in the road if you were a low-wage worker, if you were a low-income family,” she said. “Their ability to recover is just not the same as ours.”Jesus Quinonez lost his job as a manager at a warehouse in the San Diego area early in the pandemic. He quickly found another job — with a company that shut down before he could begin work. He hasn’t worked since.It took Mr. Quinonez, 62, three months to fight his way through California’s overwhelmed unemployment insurance system and begin receiving benefits. Less than two months later, a $600-a-week unemployment supplement from the federal government expired, leaving Mr. Quinonez, his wife and his four children trying to subsist on a few hundred dollars a week in regular unemployment benefits.By January, Mr. Quinonez was four months behind on rent on the one-bedroom trailer he shares with his family. He had raided his 401(k) account, leaving no savings a few years before his intended retirement. Government nutrition assistance kept his family fed, but it didn’t help with the car payment, or pay for toilet paper.“I started falling behind on my bills, plain and simple,” he said.A closed storefront in Newark. Not everyone made it into the lifeboats unscathed.Credit…Bryan Anselm for The New York TimesFor hundreds of thousands of small businesses, government aid dried up long before they could welcome back customers. Many will never reopen.Credit…Bryan Anselm for The New York TimesBut in December, Congress passed a $900 billion aid package, which included a second round of direct checks to households and revived the expanded unemployment programs. By January, Mr. Quinonez was able to pay off at least part of his debt, enough to hold on to the trailer and his car. The next round of aid should carry Mr. Quinonez until he can work again.“As soon as they lift the restrictions and more people get vaccinated, I see things coming back good,” he said. “I expect to get a job, and I expect to continue working until I retire.”Whether Mr. Quinonez’s story — and millions more like it — should count as a success or failure for public policy is partly a matter of perspective. Mr. Quinonez himself is unimpressed: He worked and paid taxes for decades, then found himself subject to a decrepit state computer system and a divided Congress.“Now that we need them, there’s no freaking help,” he said.Research from Eliza Forsythe, an economist at the University of Illinois, found that from June until Feb. 17, only 41 percent of unemployed workers had access to benefits. Some of the rest were unaware of their eligibility or couldn’t navigate the thicket of rules in their states. Others simply weren’t eligible. Asian workers, Black workers and those with less education were disproportionately represented among the nonrecipients.The gaps and delays in the system had consequences.“The impact of that is folks’ having to move out of their apartments because they have this money that’s supposed to be coming but they just haven’t received it,” said Rebecca Dixon, executive director of the National Employment Law Project, a worker advocacy group. Others kept their homes because of eviction bans, but had their utilities shut off, Ms. Dixon added, or turned to food banks to avoid going hungry — measures of food insecurity surged in the pandemic.Still, the federal government did far more for unemployed workers than in any previous recession. Congress expanded the safety net to cover millions of workers — freelancers, part-time workers, the self-employed — who are left out in normal times. At the peak last summer, the state and federal unemployment systems were paying $5 billion a day in benefits — money that helped workers avoid evictions and hunger and that flowed through the economy, preventing an even worse outcome.The record of other federal responses is similarly mixed. The Paycheck Protection Program helped hundreds of thousands of small businesses but was plagued by administrative hiccups and, at least according to some estimates, saved relatively few jobs. Direct checks to households similarly helped keep families afloat, but sent billions of dollars to households that were already financially stable, while failing to reach some of those who needed the help the most — in some cases because they had not filed tax returns or did not have bank accounts.Beyond the successes and failures of specific programs, any evaluation of the broader economy needs to start with a question: Compared with what?Relative to a world without Covid-19, the economy remains deeply troubled. The United States had 9.5 million fewer jobs in February than a year earlier, a hole deeper than in the worst of the last recession. Gross domestic product fell 3.5 percent in 2020, making it among the worst years on record.Relative to the rosy predictions early in the pandemic — when economists hoped a brief shutdown would let the country beat the virus, then get quickly back to work — the downturn has been long and damaging. But those hopes were dashed not by a failure of economic policy but by the virus itself, and the failure to contain it.“If you want to think back on what we got wrong, really the fundamental errors were about the spread of the virus,” said Karen Dynan, a Harvard economist and Treasury Department official during the Obama administration. But relative to the outcome that forecasters feared in the worst moments last spring, the rebound has been remarkably strong. In May, economists at Goldman Sachs predicted that the unemployment rate would be 12 percent at the end of 2020 and wouldn’t fall below 6 percent until 2024. The same team now expects the rate to fall to 4 percent by the end of this year. Other forecasters have similarly upgraded their projections..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.The recovery proved so strong in part because businesses were able to adapt better — and Americans, for better or worse, were willing to take more risks — than many people expected, allowing a faster rebound in activity over the summer. But the biggest factor was that Congress responded more quickly and forcefully than in any past crisis — a particularly remarkable outcome given that both the White House and Senate were controlled by Republicans, a party traditionally skeptical of programs like unemployment insurance.Millions of laid-off workers waited weeks or months to begin receiving help, a lag that often left financial consequences.Credit…Bryan Woolston/ReutersLong lines at food banks provided a hint of the number of people who slipped through the cracks.Credit…Tamir Kalifa for The New York Times“The dominant narrative about Washington and about legislating and public policy is one of dysfunction, one of not being able to rise to meet challenges, one of not being able to get it together to address glaring problems, and I think it’s a well-earned narrative,” said Michael R. Strain, an economist at the American Enterprise Institute. “But when I look back over the last year, that is just not what I see.”Congress didn’t prevent a recession. But its intervention, along with aggressive action from the Federal Reserve, may have prevented something much worse.“We could have experienced another Great Depression-like event that took years and years to recover from, and we didn’t,” Dr. Strain said.Washington’s moment of unity didn’t last. Democrats pushed for another multitrillion-dollar dose of aid. Republicans, convinced that the economy would rebound largely on its own once the pandemic eased, wanted a much smaller package. The stalemate lasted months, allowing aid to households and businesses to lapse. Economists are still debating the long-term impact of that delay, but there is little doubt it resulted in thousands of business failures.“We had this grand success that policymakers acted so quickly in passing two significant pieces of legislation early in the pandemic, and then they flailed through the whole fall in just the most frustrating of ways,” said Wendy Edelberg, director of the Hamilton Project, an economic-policy arm of the Brookings Institution. “That was just such an unforced error and created confusion and needless panic.”But unlike in 2009, when Republican opposition prevented any significant economic aid after President Barack Obama’s first few months in office, Congress did eventually provide more help. The $900 billion in aid passed in late December prevented millions of people from losing unemployment benefits, and helped sustain the recovery at a moment when it looked like it was faltering.The $1.9 trillion plan that Democrats pushed through Congress this month could help the United States achieve something it failed to do after the last recession: ensure a robust recovery.If that happens, it could fundamentally shift the narrative around the pandemic recession. The damage was deeply unequal, and the economic response, though it helped many families weather the storm, didn’t come close to overcoming that inequity. But a recovery that restores jobs quickly could help workers like Mr. Quinonez get back on track.“It’s just a bad year, and you just close the page and move on and try to make the best of the new days and new years,” he said. “Things are going to get better.”AdvertisementContinue reading the main story More

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    Unemployment Claims Fall, Fueling Economic Hope

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutGuidelines After VaccinationAdvertisementContinue reading the main storySupported byContinue reading the main storyUnemployment Claims Fall, Fueling Economic HopeAlthough millions remain jobless and layoffs continue, the latest data adds to evidence that distress is on the decline.Diners at a Minneapolis restaurant. Business restrictions across the country have begun to lift and vaccinations have picked up, fueling hopes of an economic resurgence.Credit…Liam Doyle for The New York TimesMarch 11, 2021Updated 1:10 p.m. ETThe second year of the coronavirus pandemic is starting with rising hopes for the economic outlook — and a long way to go.Positive signs are emerging as restrictions on businesses lift and the pace of vaccine distributions ramps up. But millions remain unemployed, and many economists are cautioning that a return to pre-pandemic conditions could take months, if not years.That reality became all the more evident on Thursday, when the Labor Department reported that a total of 709,000 workers filed first-time claims for state unemployment benefits in the week that ended March 6. Though the figure was 47,000 lower than the week before — and touching the lowest levels of the last year — it was still extraordinarily high by historical standards.“The story week in and week out is that magnitude steals the show,” said AnnElizabeth Konkel, an economist at the career site Indeed. The report “really paints the picture of long-term joblessness,” she said, adding, “That is the reality for millions of Americans and is going to be a hurdle for the recovery to clear.”All told, there are about 9.5 million fewer jobs than there were a year ago. More than four million people have dropped out of the labor force, a group not included in the most widely cited unemployment rate.“We’re still not yet at the phase of the recovery where we’re seeing the floodgates open up,” said Daniel Zhao, senior economist with the career site Glassdoor. “I don’t think it’s quite fair to call what we’ve done so far ‘reopening’ because there’s still a lot of people who are out of work and a lot of businesses that are closed.”On a seasonally adjusted basis, new state unemployment claims last week totaled 712,000, shaking off a surge in the last week of February caused in part by the devastating winter storms in Texas.In addition to the state claims, there were 478,000 new claims last week for Pandemic Unemployment Assistance, a federal program covering freelancers, part-timers and others who do not routinely qualify for state benefits, an increase of 42,000.The Labor Department report was released a day after Congress gave final approval to President Biden’s $1.9 trillion relief package, which will inject the economy with a fresh surge of federal aid. The legislation, signed by Mr. Biden on Thursday, includes an extension of federal jobless benefits, which could provide a stopgap measure of relief for those still out of work as the labor market begins to heal in earnest after months of uneven improvement.The provisions come at an urgent moment for the millions of jobless: Democrats had been racing to get the bill signed into law before federal unemployment benefits begin to lapse on Sunday. Under its terms, a $300 weekly supplement to other unemployment payments will be extended through Sept. 6. The Pandemic Unemployment Assistance program will be available for at least 79 weeks, up from 50, and run through Sept. 6.The Coronavirus Outbreak More

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    Inflation Fear Lurks, Even as Officials Say Not to Worry

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat to Know About the BillSenate PassageWhat the Senate Changed$15 Minimum WageChild Tax CreditAdvertisementContinue reading the main storySupported byContinue reading the main storyInflation Fear Lurks, Even as Officials Say Not to WorryPrices have yet to show much movement, but the prospect of an unbridled economy’s surging back from the pandemic has unsettled the markets.Shoppers in Southaven, Miss. Higher spending seems almost certain in the months ahead as vaccinations prompt Americans to get out and about, deploying savings.Credit…Rory Doyle for The New York TimesNelson D. Schwartz and March 10, 2021Updated 5:46 p.m. ETWhile the Biden administration’s ambitious effort to salve the pandemic’s deep economic wounds made its way through Congress, proponents insisted that funneling $1.9 trillion to American households and businesses wouldn’t unshackle a long-vanquished monster: inflation.Officials at the Federal Reserve, responsible for balancing the job needs of Americans with price pressures that could erode their buying power, have said there is little cause for worry.Yet as the legislation moved toward the finish line, inflation prospects increasingly influenced political commentary and Wall Street trading.The worries reflect expectations of a rapid economic expansion as businesses reopen and the pandemic recedes. Millions are still unemployed, and layoffs remain high. But for workers with secure jobs, higher spending seems almost certain in the months ahead as vaccinations prompt Americans to get out and about, deploying savings built up over the last year.Jamie Dimon, chief executive of JPMorgan Chase, is among those tracking the inflation threat. “There’s a very good chance you’re going to have a gangbuster economy for the rest of this year and easily into 2022, and the question is: Does that overheat everything?” he said in an interview with Bloomberg Television last week.In addition to the $1.9 trillion about to pour forth, Mr. Dimon said, $1 trillion in savings that piled up during the pandemic remain unspent.The inflation fixation has been one driver behind a sharp sell-off in government bonds since the start of the year, pairing with a stronger growth outlook to push yields on 10-year notes up to about 1.5 percent, from below 1 percent. Bonds, like stocks, tend to lose value when inflation expectations grow, eroding asset values.“I would not buy 10-year Treasurys,” Mr. Dimon said.The volatile bond trading prompted several unnerving days on Wall Street last week. High-flying tech stocks — previously seen as a haven for those chasing market-beating yields — were particularly upended, though broad share indexes remain near record highs.“I would suspect there’s a pretty good chance you’re going to see rates going up,” Mr. Dimon said. “And people are starting to worry about that.”Rising bond yields have also caused an uptick in mortgage rates, threatening one of the brightest spots in the coronavirus economy, the housing market. Home prices have been surging, especially in the suburbs, but a sustained rise in borrowing costs would almost certainly undermine that trend.Jerome H. Powell, the Fed chair, and other central bank officials have made clear that they are not worried about the expected bounce in inflation. “There’s a difference between a one-time surge in prices and ongoing inflation,” Mr. Powell said this month, making it clear that he expected the coming increase to be transitory.The Fed earned an inflation-fighting reputation in the 1970s and 1980s, when it eventually contained runaway prices with double-digit interest rates that caused a recession. But price gains have been slow for decades, and Mr. Powell and his colleagues have been working to ensure that consumers and businesses don’t start to expect ever-lower inflation.Healthy economies tend to have gentle price increases, which give businesses room to raise wages and leave the central bank with more room to cut interest rates during times of trouble. If inflation drops too low, it risks price declines that are especially painful for debtors, whose debts stay the same even as prices and wages fall.Fed officials revised their framework for setting monetary policy last summer, saying that instead of shooting exactly for 2 percent inflation, they would aim for 2 percent on average — welcoming inflation that runs faster some of the time.Inflation is expected to increase in the coming months as prices are measured against weak readings from last year. Analysts surveyed by Bloomberg expect the Consumer Price Index to hit an annual rate of 2.9 percent from April through June, easing to 2.5 percent in the three months after that before easing gradually to year-over-year gains of 2.2 percent in 2022, based on the median projection.But those numbers are nothing like the staggering price increases of the 1970s, and evidence of renewed inflation is paltry so far.Gasoline prices rose 6.4 percent in February, the Labor Department said on Wednesday.Credit…Benjamin Rasmussen for The New York TimesOn Wednesday, the Labor Department reported that prices rose modestly in February, nudged by an increase in gasoline prices that lifted the Consumer Price Index by 0.4 percent.Excluding the volatile food and energy categories, the index rose 0.1 percent.Gasoline prices alone were up 6.4 percent in February. But over all, the data matched projections, suggesting that inflation remains under control, despite a recent rise in prices for commodities like oil and copper. Stock markets rose on the news, with the Dow Jones industrial average reaching a new high.“Outside of another buoyant advance in energy prices in February, consumer price inflation remains very tame,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.The inflation concerns among some investors are a turnaround from the aftermath of the 2007-9 recession, which was followed by a decade of frustratingly slow growth in the United States and Europe. For much of that time, deflation, or falling prices, was a leading cause of anxiety among investors and economic experts..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.Now there is a belief that economic growth will ramp up at least temporarily, thanks to relief from Capitol Hill and increased vaccinations across the country.The about-face was noted Wednesday by the economist Bernard Baumohl in a letter to clients. “If you suddenly feel the ground shaking beneath you, it’s not because an earthquake struck,” he wrote. “What you’re experiencing is a wild stampede of Wall Street bulls trampling over their previous softer economic forecasts and now charging ahead with near frothy upward revisions to G.D.P. growth and inflation projections for 2021.”Mr. Powell, the Fed chair, has made it clear that officials will need to see the economy at full employment, inflation above 2 percent and evidence that it will stay higher for some time before they will raise their key interest rate from rock bottom.“Those are the conditions,” he said this month. “When they arrive, we will consider raising interest rates. We’re not intending to raise interest rates until we see those conditions fulfilled.”Fed officials have been less concrete about what might prod them into slowing their vast bond purchases, which they have been using to make many types of borrowing cheaper and bolster demand. Officials have said they would like to see “substantial” progress before tapering off their buying, and have repeatedly said they will signal any change far in advance.The Fed will meet in Washington next week and release a fresh set of policymakers’ economic projections next Wednesday. Although the Fed looks at the Consumer Price Index, it bases its policy on a different gauge of price trends, which tends to run slightly lower.“It is possible that participants will project higher 2021 inflation, especially if the Fed staff forecast incorporates policy effects on inflation or a reopening demand surge in select categories,” Goldman Sachs economists wrote last week. “Signaling awareness of these transient boosts to inflation in advance might make it easier for Fed officials to credibly downplay them later.”The Goldman analysts expect the Fed’s projections to suggest that it might make one rate increase in 2023. Previously, Fed officials had not penciled in any rate increases through the end of that year.Over the long term, inflation can be a concern because it hurts the value of many financial assets, especially stocks and bonds. It makes everything from milk and bread to gasoline more expensive for consumers, leaving them unable to keep up if salaries stall. And once inflation becomes entrenched, it can be hard to subdue.But most mainstream economists doubt that a sustained bout of troublesome inflation is on its way.“The inflation narrative has switched to concerns about rising prices,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “For the Fed, price response to the economy reopening is seen as transitory and is unlikely to cause too much angst, given inflation pressures are not expected to be sustained.”And Mr. Dimon, the JPMorgan Chase chief, signaled that inflation fears needed to be put in perspective. “I would put that on the things to worry about,” he said, but “I wouldn’t worry too much about it” — certainly not compared with taming the pandemic itself.AdvertisementContinue reading the main story More

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    Stimulus Checks Helped Personal Income Surge in January

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storySupported byContinue reading the main storyIncome and Spending Gains Are Latest Sign of Economic RecoveryPersonal income and spending both surged in January as a new round of government checks hit Americans’ bank accounts.A Los Angeles mall this week. Money spent on goods rose 5.8 percent in January, but spending on services rose only 0.7 percent.Credit…Philip Cheung for The New York TimesSydney Ember and Feb. 26, 2021Updated 5:00 p.m. ETThe American economic recovery came perilously close to falling off a cliff at the end of last year. But government aid arrived just in time to prevent a disaster — and possibly paved the way for a dynamic rebound.Personal income surged a remarkable 10 percent in January, the Commerce Department reported on Friday. Spending increased last month, too, by a healthy 2.4 percent, largely fueled by a rise in purchases of goods.The report was the latest sign of the economy’s slow but steady march forward after a series of setbacks.Yet the data also underscored the extent to which government aid is buoying the economy. The rise in income last month was almost entirely attributable to the $600 government relief checks approved in December and to unemployment insurance payments. And while spending ticked up, purchases of services remained depressed as the pandemic continued to weigh heavily on the leisure and hospitality industries even as coronavirus cases fell.“Technically, you could say we’re recovering,” said Diane Swonk, chief economist for the accounting firm Grant Thornton. “But the patterns in both income and spending point out the fragility of the recovery without aid to bridge these waters that are poisonous.”That the economy remains reliant on government aid is all the more resonant as Democrats in Washington try to push through President Biden’s $1.9 trillion relief measure, which would provide a round of $1,400 checks that could further power consumer spending.Although the data on Friday indicated that the recovery was still fragile, it provided fresh evidence that it was no longer in danger of moving in reverse, a trend also seen in recent reports on retail sales and orders of durable goods.Yields on government bonds, the basis for mortgage rates and corporate borrowing, have risen sharply this month as investors anticipate a quick pickup in growth. Yields on 10-year Treasury notes, below 1 percent for much of 2020, have climbed to roughly 1.5 percent in recent days.The encouraging data led Morgan Stanley on Friday to raise its forecast of first-quarter economic growth to 2 percent (8.1 percent on an annualized basis) from 1.8 percent. Before Congress passed the round of aid that produced the January checks, many economists thought G.D.P. might shrink in the first quarter.There is a possible downside to a robust, stimulus-powered recovery. Some economists have warned in recent weeks that inflation could become a problem, which could prompt the Federal Reserve to cut back on its measures to bolster the economy. A change of posture from the Fed would probably be seen as bad news for stocks, and trading on Wall Street has been turbulent this week as investors react to the sudden moves in bond yields.But the report on Friday gave no indication that inflation was spinning out of control. Consumer prices were up 1.5 percent in January from a year earlier, well below the Fed’s 2 percent target. More

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    Should the Feds Guarantee You a Job?

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    #masthead-section-label, #masthead-bar-one { display: none }The Jobs CrisisCurrent Unemployment RateWhen the Checks Run OutThe Economy in 9 ChartsThe First 6 MonthsAdvertisementContinue reading the main storySupported byContinue reading the main storyShould the Feds Guarantee You a Job?Not long ago, the question was rarely asked. Now, politicians and economists of various stripes are willing to consider it.Credit…Tom HaugomatFeb. 18, 2021, 5:00 a.m. ETWhat should the president do about jobs?For 30 years, Democratic administrations have approached the question by focusing on the overall economy and trusting that a vibrant labor market would follow. But there is a growing feeling among Democrats — along with many mainstream economists — that the market alone cannot give workers a square deal.So after a health crisis that has destroyed millions of jobs, a summer of urban protest that drew attention to the deprivation of Black communities, and another presidential election that exposed deep economic and social divides, some policymakers are reconsidering a policy tool not deployed since the Great Depression: to have the federal government provide jobs directly to anyone who wants one.On the surface, the politics seem as stuck as ever. Senator Cory Booker, the New Jersey Democrat, introduced bills in 2018 and 2019 to set up pilot programs in 15 cities and regions that would offer training and a guaranteed job to all who sought one, at federal expense. Both efforts failed.And after progressive Democrats in Congress proposed a federal jobs program as part of their Green New Deal in 2019, Representative Liz Cheney of Wyoming, the No. 3 House Republican, asked, “Are you willing to give the government and some faceless bureaucrats who sit in Washington, D.C., the authority to make those choices for your life?”But when it comes to government intervention in the economy, the political parameters have shifted. A system that balked at passing a $1 trillion stimulus after the financial crisis of 2008 had no problem passing a $2.2 trillion rescue last March, and $900 billion more in December. President Biden is pushing to supplement that with a $1.9 trillion package.“The bounds of policy discourse widened quite a bit as a consequence of the pandemic,” said Michael R. Strain, an economist at the American Enterprise Institute, a conservative think tank.On the left, there is a sense of opportunity to experiment with the unorthodox. “A job guarantee per se may not be necessary or politically feasible,” said Lawrence Katz, a Harvard professor who was the Labor Department’s chief economist in the Clinton administration. “But I would love to see more experimentation.”And Americans seem willing to consider the idea. In November, the Carnegie Corporation commissioned a Gallup survey on attitudes about government intervention to provide work opportunities to people who lost their jobs during the Covid-19 pandemic. It found that 93 percent of respondents thought this was a good idea, including 87 percent of Republicans.Even when the pollsters put a hypothetical price tag on the effort— $200 billion or more — almost nine out of 10 respondents said the benefits outweighed the cost. And hefty majorities — of Democrats and Republicans — also preferred government jobs to more generous unemployment benefits.The question is, would the Biden administration embrace a policy not deployed since the New Deal?“We tried to set the bar at a federal job guarantee,” said Darrick Hamilton, an economics professor at the New School for Social Research. He was among advisers to Senator Bernie Sanders who worked with Mr. Biden’s representatives before the November election to devise an economic strategy the Democratic Party could unite behind. “It was the cornerstone of what we brought in.”On paper, at least, a job guarantee would drastically moderate recessions, as the government mopped up workers displaced by an economic downturn. But unlike President Franklin D. Roosevelt’s programs to provide jobs to millions displaced by the Great Depression, the idea now is not just to address joblessness, but to improve jobs even in good times.If the federal government offered jobs at $15 an hour plus health insurance, it would force private employers who wanted to hang on to their work force to pay at least as much. A federal job guarantee “sets minimum standards for work,” Dr. Hamilton said.The president does not seem ready to go all the way. “We suspected we weren’t going to get there,” Dr. Hamilton said.Mr. Biden’s recovery plan includes efforts to train a cohort of new public health workers, and to fund the hiring of 100,000 full-time workers by public health departments. His commitment to expand access to child care and elder care comes paired with a promise to create good, well-paid jobs in caregiving occupations. And he has pledged — in ways not yet translated into programs — to foster the creation of 10 million quality jobs in clean energy.“There are a number of proposals to pair programs for people to be at work with the needs of the nation,” said Heather Boushey, a member of Mr. Biden’s Council of Economic Advisers.And yet the idea of a broad job guarantee is still an innovation too far. For starters, it would be expensive.Dr. Hamilton and William A. Darity Jr. of Duke University, who favor a federal job guarantee, published a 2018 study in which they sought to estimate the cost. Based on 2016 employment figures, and assuming an average cost per job of $55,820, including benefits, they found it would cost $654 billion to $2.1 trillion a year, which would be offset to some extent by higher economic output and tax revenue, and savings on other assistance programs like food stamps and unemployment insurance.And the prospect of a large-scale government intervention in the labor market raises thorny questions.First, there’s determining the work the government could offer to fulfill a job guarantee. Health care and infrastructure projects require workers with particular skills, as do high-quality elder care and child care. Jobs, say, in park maintenance or as teaching aides could encroach on what local governments already do.What’s more, the availability of federal jobs would drastically change the labor equation for low-wage employers like McDonald’s or Walmart. Dr. Strain argues that a universal federal guarantee of a job that paid $15 an hour plus health benefits would “destroy the labor market.”Some wealthy countries have job guarantees for young adults. Since 2013, the European Union has had a program to ensure that everyone under 25 gets training or a job. But those programs are built on subsidizing private employment, not offering government jobs.Many European countries have also subsidized private payrolls during the pandemic, allowing employers to cut hours instead of laying off workers.The United States has a limited wage-subsidy program, the Work Opportunity Tax Credit, passed in 1996. It extends a credit of up to $9,600 for employers who hire workers from certain categories, like food-stamp recipients, veterans or felons.Developing countries have tried job guarantees, which the Organization for Economic Cooperation and Development said in 2018 “go beyond the provision of income and, by providing a job, help individuals to (re)connect with the labor market, build self-esteem, as well as develop skills and competencies.” But in more advanced economies, the report added, “past experience with public-sector programs has shown that they have negligible effects on the post-program outcomes of participants.”A 2017 overview of research on the effectiveness of labor market policies — by David Card of the University of California, Berkeley; Jochen Kluve of Humboldt University in Berlin; and Andrea Weber at Vienna University — concluded that programs that improve workers’ skills do best, while “public-sector employment subsidies tend to have small or even negative average impacts” for workers. For one, private employers seem not to value the experience workers gain on the government’s payroll.Another economist, David Neumark of the University of California, Irvine, is skeptical that new policies are needed to ensure a decent living for workers. Programs like the earned-income tax credit, which supplements the earnings of low-wage workers, just need to be made more generous, he said.“I’m not sure we are missing the tools,” he said. “Rather, we have been too stingy with the tools we have.”Dr. Neumark notes that the idea of government intervention to help working Americans is gaining traction even on the political right. “Republicans are at least talking more about the fact that they need to deliver some goods for low-income people,” he said. “Maybe there is space to agree on some stuff.”While opposed to a broad guarantee, Dr. Strain of the American Enterprise Institute sees room for new efforts. “If the question is ‘Do we need more aggressive labor market policies to increase opportunities for people?’ the answer is yes,” he said. “I think of it more as a moral imperative than from an economic perspective.”Jack Begg More

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    Dip in Unemployment Claims Offers Hope as New Virus Cases Ease

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesSee Your Local RiskNew Variants TrackerVaccine RolloutAdvertisementContinue reading the main storySupported byContinue reading the main storyDip in Unemployment Claims Offers Hope as New Virus Cases EaseWith restrictions lifting, workers in industries hard hit by the pandemic are getting a respite from layoffs, and job postings are increasing.A closed restaurant at Grand Central Market in Los Angeles. Workers in leisure and hospitality industries have been hit especially hard by job losses during the pandemic.Credit…Philip Cheung for The New York TimesFeb. 11, 2021Updated 5:59 p.m. ETAfter a pandemic-induced spike in layoffs amid new restrictions in many states, unemployment claims are falling, helped by a drop in new coronavirus cases.Initial claims for unemployment benefits declined last week, the Labor Department reported Thursday, and were significantly below the level in most of December and early January.New coronavirus cases have fallen by a third from the level of two weeks ago, prompting states like California and New York to relax curbs on indoor dining and other activities. That, in turn, has provided something of a respite for workers in the hardest-hit industries.Last week brought 813,000 new claims for state benefits, compared with 850,000 the previous week. Adjusted for seasonal variations, last week’s figure was 793,000, a decrease of 19,000.There were 335,000 new claims for Pandemic Unemployment Assistance, a federally funded program for part-time workers, the self-employed and others ordinarily ineligible for jobless benefits. That total, which was not seasonally adjusted, was down from 369,000 the week before.While claims remain extraordinarily high by historical standards, the improvement has raised hopes that layoffs will continue to slow as vaccinations spread and employers shift from shedding workers to adding them.“We’re stuck at this very high level of claims, but activity is picking up,” said Julia Pollak, a labor economist with ZipRecruiter, an online employment marketplace. Indeed, job postings at ZipRecruiter stand at 11.3 million, close to the 11.4 million level before the pandemic hit.The improving pandemic situation has eased the strain on restaurants and bars, Ms. Pollak added. But with a deficit of almost 10 million jobs since the pandemic struck, and employers still cautious about hiring, the economy faces broad challenges.Jerome H. Powell, the Federal Reserve chair, told the Economic Club of New York on Wednesday that policymakers should stay focused on restoring full employment, “given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the postpandemic economy.”He noted that employment had dropped just 4 percent for workers earning high wages but “a staggering 17 percent” for the bottom quartile of earners.The Coronavirus Outbreak More