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Unemployment Benefits Could Devastate the U.S.’ Economic Recovery

Posted on by jrooney

The coronavirus has caused a recession in the U.S. that will definitely be in the history books, as it is one of the biggest the U.S. has ever seen.With more than 20 millions Americans unemployed, with $600 out of a weekly income so sudden many will only be able to pay for necessities. Jobs aren’t looking promising either for those unemployed with many people not knowing how long it could be for them to find a job leaves people worried for the near future. This wont only hurt households but also businesses because many will no longer be in an individual’s purchasing power range. 

The government can’t end this bonus onto stimulus checks. It won’t only slow down our economy but also decrease economic activity and hurt many households. The CARES Act was one of the most successful relief projects. If that ends before unemployment starts to decrease it will severely halt our recovery from this pandemic. 

The bonus doesn’t have to be $600 and decreasing the bonus might help the economy recover faster because in some cases people are making more money with stimulus checks than when they had a job. 

The U.S. was able to help counter a loss in income by handing out over $3 trillion through unemployment checks. This caused a 10.5% increase in income whereas it would have been a 6.3% decrease without unemployment. But with the extra $600 per week ending soon this could push many households over the edge and severely decrease income amongst people

With the removal of this the U.S. could experience and even worse decrease in consumer spending across the country. The Commerce Department reported that this has been the largest drop in consumer spending since the department opened, falling 13%. This was 6% higher than the previous record. This decrease is due to a large difference between sectors where necessities are experiencing a huge surge and others are seeing major losses. Necessities like groceries, office supplies, and food delivery experienced an overall increase of  approximately 7% for groceries and office supplies and a minimum of 50% increase in food delivery. Grocery delivery saw the biggest increase of about 400%. While the majority of the other sectors of commerce saw a decrease ranging from 10% to 90%.

The U.S. trade has also severely decreased due to World ties being halted. Trade in the U.S. significantly dropped. The Bureau of Economic Analysis (BEA) reported that the U.S. experienced a 10% decrease in exports 20 billion less than the previous month and a 6% decrease in imports 15 billion less than the previous month. 

The global trade network was heavily affected by the corona virus and some experts think it will forever change the overall flow of global trade. It has the U.S. questioning it’s dependency on the global supply chain. Could this outbreak revive the U.S. dominance in production of goods? This also caused the U.S. restricting some of its exports. 

With the raised concern for health because of coronavirus the international freight and cargo shipments have experienced a sharp decline with its now limited amount of workers on site. Some shipments even are getting canceled due to the higher demand for medical supplies. Companies producing medical supplies are also prioritizing domestic orders decreasing international trade.

The U.S. has a long path toward its economical recovery and there are multiple variables that can affect length and outcome from this pandemic. With people out of jobs the timing of when changes occur can severely impact the longevity of our recovery. Especially changes in the unemployment benefits if the U.S. removes the bonus too early it will make it worse. It will decrease consumer consumption causing businesses to sell less and require more stock, so trade can also decrease because of this. The U.S. has to prolong a bonus until unemployment starts going down for the smoothest transition for a faster recovery.

By: James Rooney

 

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32 Comments

  1. Unemployment rates will continue to increase due to the cut of the $600 bonus. Specifically, in a city like Boston where there are lots of low-income families that are suffering more now than ever before. Families like these are put under a lot of stress because they don’t know how they’ll be able to provide necessities for their loved ones and pay their bills. Even though unemployment benefits is devastating to the U.S. economy, what can we do? Many households need money because due to COVID-19 they are either not able to work or are laid off. Your argument enhances my thinking on how the government should still provide benefits to help those in need until they find a stable job. Without a job due to the pandemic, what can one do? As people start holding stable jobs we will see a decline in unemployment rates which I agree would be a much better and smoother transition for the economy.

  2. I absolutely agree with the necessity for the U.S Government to do something to help the economy during this time. I do not think stopping the stimulus checks will help anyone, even the government. If stimulus checks stop, more citizens will fall into poverty. However, some disagree with the idea that the government needs to slowly stop supplying aid. In a Podcast by the New York Times, The Daily, Jerome H. Powell, the Federal Reserve chair, urges the U.S government to spend more money. He believes this will keep the economy afloat, even if the government’s debt. I think in some ways both arguments are true. I was very compelled by your idea of having stimulus checks, but slowly decreasing the amount. This will give people a sense of security while encouraging them to get a job that will pay more. It seems like a blend of the government stepping out of the economy while spending money to keep the U.S economy afloat.
    Your blog raises the question of what the government will do. Will they continue helping citizens or completely change their approach? How will the public react to their decision? Some may be afraid or angry if the government stops the stimulus checks. This post raises a lot of questions about the future economy.

  3. I find it interesting that the U.S. government is all-for sending stimulus checks to those that find themselves unemployed during the Covid-19 pandemic, yet the government doesn’t account for the fact that the economy will be in great recession at the conclusion of the pandemic. I agree with the fact that the U.S. government should prolong the distribution of stimulus checks until unemployment rates decrease to certain point; however, this would likely cause an uproar of dissatisfaction among certain unemployed people out there. Overall, distributing stimulus checks as a “return-to-work” bonus (so to say) would’ve been an ideal plan because of the fact that there would be more businesses up and running to reimburse the U.S. economy for whatever amount that was distributed in the bonuses.

  4. Right now, we are at a crossroads: choosing between saving lives or saving the economy. Unemployment benefits have proven key for keeping middle and low-class families afloat during the pandemic. Also, the halt the economy has experienced has not necessarily been the cause of people being out of a job, but because of the restrictions put upon by federal and state governments. As you said, unemployment benefits caused a 10.5% increase in income. However, consumer spending dropped a record 13%. People are staying home and refraining from going out for leisure, thus spending less. In the end, the only viable option to keep the economy from crashing more than it has is to extend unemployment benefits at the current $600/week amount, not decreasing it or eliminating it, as this would harm not only the economy, but millions of people’s lives. Are people making more from unemployment than they would make from their job? This shows that companies are not paying their workers a living wage. Do you want the economy to be stimulated? Increase the minimum wage to a living wage.

  5. I feel like this post is very true when it comes to people being afraid economically during this pandemic. it is so true, and real that people do not know what is next financially for them or their families. and it id undoubtedly scary! people who don’t currently have jobs and are on the search for one, are very nervous because they don’t know when they will have one. There are so many companies that are laying off employees, and not hiring new ones. and this is really scary-people depend on their pay and jobs for survival! I do think that this i a huge issue, and it is extremely scary for the GLOBAL economy let alone the national economy.

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