Quote from Savings Beagle on September 7, 2020, 3:05 pm

Last week we received not only the weekly unemployment numbers, but also the employment rate for August 2020.

First, the August employment situation.

Nonfarm payroll rose by 1.4 million.  Which is somewhat unexpected, but most welcome, news.  And with that increase in the number of employed Americans, the unemployment rate dropped to 8.4% from July's 10.2% rate.

We're seeing a slow reduction in the number of Americans who remain unemployed as a result of the government shutdowns of spring/early summer 2020.

And with regard to unemployment claims filings, we have been seeing initial claims running in the 1 million range.  This past week's filings - week ending August 29 - showed initial claims at 881,000.  So a slight decrease there, as well.  But still well off the "normal" numbers of 200,00 - 400,000 we'd see with a traditionally healthy economy.

But, unfortunately, nothing is traditional about the times we're going through right now.

Consider there are states - New York and California primarily - who've yet to fully open their economies.  In fact, within the last few weeks, New York has said it doubts it will allow in-restaurant dining before summer of 2021!

How many restaurants will still be operational by then?

So, while we see strengthening unemployment numbers, there is still a drag, some of it resulting from Covid, but another portion from state and local governments that continue to keep a heavy hand on what can and cannot reopen.

Which raises the issue of compensation for both individuals and businesses who continue to suffer as a result of Covid shutdowns.

Congress still has not moved legislation to increase the unemployment compensation that reverted to normal levels July 31, 2020.

President Trump stepped in with an executive order providing $300 additional unemployment dollars per week (states could contribute an additional $100 for a total of $400/week) and many states are finally implementing those increased payments.  But funding for this increased amount is limited, lasting for only weeks rather than months. 

Congress needs to appropriate more if the increased weekly payments are to continue.

The same applies to relief payments for small and medium-sized businesses.  And state and local governments, too.

Additionally, Congress will need to take action on funding the federal government in the coming weeks as the fiscal year ends September 30, 2020, with no budget agreement yet in place.

Which is why we'll probably see a large scale plan cobbled together and voted on prior to the end of September.

Although, I can't guarantee that.  I thought for sure we'd have some sort of Covid relief package for unemployment/business/local governments enacted by now.  Unfortunately, we have one of the most contentious political atmospheres, ever, going on right now.  And with a presidential election less than two months from this date, who knows what will happen.

Without an agreement on some relief/budget provisions, more Americans will suffer.

While the unemployment numbers are getting better, there are still many people relying on benefits to remain financially afloat with limited job opportunities available to them.

And the longer we go on without opening fully all aspects of the U.S. economy, more businesses will have trouble continuing on.

I mentioned in early summer that airlines warned that without additional federal assistance, they would have to lay off tens of thousands of employees come Oct. 1 after the initial round of government relief funding was used up.  Well, many of the airlines have already alerted employees they will be furloughed on that date without more federal help.

Unfortunately, I doubt airlines will be the only industry in this position in the coming months.

Which means more relief is needed.  But Congress needs to act to make that happen.

On the other side of this problem, though, is the fact that the U.S. government is spending a significant amount of money to keep individuals and businesses from failing.

Last week it was announced that the U.S. debt will reach 100% of GDP in 2021, a level not seen since the end of World War II.

We've had a debt and deficit problem in the U.S. for a while now, but the coronavirus pandemic has greatly increased our federal spending, growing our debt level to $26.7 trillion, roughly $4.7 trillion more than it was just one year earlier.

Some will argue we can spend as much as we need to as a country, debt doesn't matter.  That is the argument made by those who subscribe to and push Modern Monetary Theory, an economic viewpoint held mostly by those leaning toward the socialist philosophy.

I disagree wholeheartedly with that view.  Debt does matter, and the ramifications can be dire.  The primary problem with debt becoming a major problem for any country lies in the fact that, "it's not a problem...until it is."

Which means, we won't know when the very serious consequences of increased debt loads will result until they do.  And by that time, it will likely be too late to counter the extremely negative effects.

So, we really should, as a country, be cognizant of the potential problems that can result from spending and spending and spending beyond our means.  As we're doing right now.

The problem?  We, unfortunately, need to continue spending to ensure citizens and some businesses, that are in dire need as a result of the pandemic, and governments' responses to it, are helped until we can move to a more sound and growing economic climate.

At the same time, we also need to be judicious with what is spent, keeping in mind the potential hazards of spending more than is absolutely necessary.

Some politicians are aware of this tightrope that must be walked.  Others not so much.

Maybe it's time to let them know.