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The reversal of the labor market opens the door to a greater incentive for Biden



The decline in December, which left unemployment at 6.7%, suggests that the spread and reception of coronavirus vaccines must increase rapidly to avoid much worse damage and to allow for potential recovery in the spring and summer.

And that will give Biden and Democrats more leeway to force trillions of dollars more in stimulus spending – by whatever legislative means are available – including significant aid to state and local governments. It also means Democrats are likely to be able to approve enough direct cash to reach the $ 2,000 check they have long maintained when they include $ 600 checks approved by Congress and signed by Trump last month.

“The economy reversed in December and we still lack the 1

1.5 million jobs we were in, and the biggest problem was the virus and the expiration of the stimulus,” said Harvard professor Jason Furman, who was chairman of the Economic Advisers President Barack Obama. “Much more action is needed to control the virus and support the economy. And I think that will be enough to generate big improvements over 2021. ”

The job report in December cemented a strange legacy for Trump. The nation will have millions less jobs than when he took office, in part because of the slow and stifling federal response to the coronavirus. But the stock market has recouped all its losses since the spring and is now once again breaking records as many companies that thrive during the blockade jump and investors invest in a stronger 2021.

The split has led to a sharp recovery in K-shape, with the highest level of workers recovering to a large extent, if not completely, while tens of millions of Americans in lower-paid service jobs suffer. Economic inequality, which was already bad before the virus struck, is now at levels not seen since the 1920s before the Great Depression. Reversing this trend is one of Biden’s top priorities. And now he has more weapons with the narrowest of the Senate majorities after the Democrats’ two special victories in Georgia.

Biden will have full control of Washington – although there is no evidence of a Senate majority – for the first two years of his term. And its economic advisers plan to focus on spending to increase vaccination distribution, support troubled states and local governments, improve U.S. infrastructure, further expand unemployment benefits and channel more direct money into individual households.

Wall Street economists and analysts say some of the recent market turmoil is based on the assumption that Biden will be able to accomplish much of this, even if Democrats choose not to blow up a legislative decision that requires 60 votes in the Senate to overcome.

But they will have ample opportunity to use the vehicle to “reconcile the budget” to pass significant spending increases by one vote in the Senate. There is also a chance that more Republicans in the Senate will face the need for higher incentive spending, given the wave of new coronavirus cases and the slow nature of the vaccine.

“With the elections in Georgia, which give Democrats control, we should expect to receive a fairly large and targeted package of fiscal aid in the first quarter of the year, which investors have obviously benefited,” said Joseph Brusuelas, chief economist at consulting firm RLM. “We will quickly receive a targeted package for fiscal assistance, then another stimulus package and then infrastructure. And these are huge things. ”

State and local aid will be especially important as states are already struggling to pay billions in extended benefits approved by Congress last month, leading to several weeks of delays in payments in places such as California, Michigan, Florida and Washington. Job losses in the state and local government, forced by lower Kovid-era incomes and the need to balance budgets, also reduce the number of national jobs.

Failure to approve higher stimulus spending could push the economy into either a double recession or a recurrence of the slow, stifling and unequal recovery that followed the 2008 financial crisis. The Biden team, many of whom worked in government during the Obama is determined to learn the lessons from the last big delay.

However, even at high incentive costs, recovery will depend to a large extent on the effective and widespread use of vaccines. And even then, it can take years to return to economic conditions before the virus strikes. “I’m worried that some of the scars are big enough that we’re not fully recovered by the end of 2021,” Furman said. “Today’s issue expands what was already an open window for greater support for the economy, but we will not return to perfect condition until 2022 or 2023. In some places it will take some time.”

Job losses in December, which ended seven months of profits after a huge drop caused by viruses, came largely in services, where restaurants and bars cut 372,000 positions as cold weather and new blockages curbed demand. Overall, leisure and hotel employment, which includes hotels, tourist sites and other categories, fell by 498,000. Profits from professional and business services, retail and other areas were not enough to offset the huge losses elsewhere. Government jobs have fallen by 45,000 amid growing budget crises in the country.

There are currently about 11 million unemployed, and the unemployment rate remains at 6.7 percent, well below Covid’s peak of more than 14 percent, but still doubling than it was before Covid. And there are still nearly 20 million Americans for some form of jobless assistance.

But Wall Street traders and many economists continue to hope that the job slip will reverse relatively early this year, given the prospect of vaccines and more fiscal aid. However, if any of these things fail, the numbers could get significantly worse.

“While we remain very optimistic about the US medium to long term, we need to prepare for worse economic data, which could continue until the second half of 2021,” said James Knightley, chief international economist at ING. , wrote in a note to customers on Friday.


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