- Trump abruptly ended stimulus negotiations on Tuesday, postponing nearly all federal coronavirus aid until next month.
- “It will mean more people will fall into poverty and make terrible choices between rent, medicine and food on the table,” Heidi Shierholz, senior economist at the Institute for Economic Policy, told Business Insider.
- The country’s economic recovery is already shaky and could turn back in the coming weeks, another expert said.
- Visit the Business Insider homepage for more stories.
President Donald Trump abruptly halted negotiations for another coronavirus spending program on Tuesday, virtually ending the prospect of further federal relief ahead of the November election.
The Twitter announcement triggered a sharp drop in the stock market, with the Dow Jones industrial average immediately erasing the gains, ending the day 376 points lower. The delay in the arrival of aid in the event of a pandemic raises the prospect of further bankruptcies of small businesses, especially in restaurants. The National Restaurant Association said 40% of restaurant owners would go bankrupt within the next six months without government help.
Many economists have long urged Congress to pass yet another aid bill to keep individuals and businesses afloat, with the pandemic showing little sign of an end soon. Around 26.5 million people are still receiving unemployment benefits and permanent job losses are on the rise.
Without further help, experts say millions of unemployed Americans could see their finances devastated and set back an already fragile economic recovery.
“It’s an incredibly cruel economy and also just plain terrible,” Heidi Shierholz, policy director at the Left Institute for Economic Policy, told Business Insider. She pointed out that unemployed people typically get around 40% of their lost wages.
The size of the average weekly unemployment check is around $ 330, an amount varying widely from state to state.
“These are meager benefits and people can’t live with them,” Shierholz said. “It will mean more people will fall into poverty and make terrible choices between rent, medicine and food on the table. ”
Michele Evermore, a policy expert at the National Employment Law Project, told Business Insider that hardship is likely to increase among the unemployed without another short-term government bailout.
“It’s disappointing that so many people are going to have to suffer despite the fact that we were close to getting something,” she said.
Evermore warned that some states were trying to recover money they accidentally overpaid from the unemployed, which in many cases has already been spent. She said a legislative solution was included in the democratic aid proposal.
The U.S. economy has recovered only about half of the jobs it lost in March and April at the height of the pandemic halt. But it’s now more at risk of turning back the clock as more families cut spending, said Ernie Tedeschi, political economist at Evercore ISI.
“Even if we don’t see a turning back, I think we’ll probably see much slower growth than we would have otherwise,” Tedeschi told Business Insider. “It’s a headwind that we don’t need at the moment because growth is already slowing. ”
The latest jobs report showed the US economy added 661,000 jobs in September, less than half of the previous month’s figure and by far the smallest monthly increase since the labor market bottomed in April.
“As job growth slows, it means it will take longer and longer to fully recover from this recession,” he said. “But for individual families, it’s going to be damaging anyway. ”
Federal Reserve Chairman Jerome Powell stepped up his warnings of a weak recovery on Tuesday, while urging Congress to adopt another federal aid package.
“Insufficient support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said at an event hosted by the National Association for Business Economics.