Economy booming but far from normal, posing challenges for Biden
The US economy is growing at its fastest clip in a quarter century, yet it is far from normal, with some workers and small-business owners facing increasingly difficult times while others thrive. This divergence poses a challenge to President Biden, who has promoted the country’s economic recovery as a selling point to win support for a multi-billion dollar spending agenda that could cement his legacy. .
A summer that many business owners and consumers had hoped would return to pre-pandemic activity, there have been waves of gloom in key sectors. The restaurant is short of staff and the wait times are long. Prices for food, gasoline and many services have gone up. Buyers are struggling to find used cars. Retailers are struggling to pay rent. Beach towns are packed with tourists, but office towers in major cities remain ghost towns on weekdays, with promises of workers returning delayed by a resurgent coronavirus.
The University of Michigan Consumer Sentiment Index suffered one of its biggest monthly losses in 40 years in August, driven by a rapidly spreading delta volume and high inflation. Richard Curtin, the survey’s chief economist, said the fall “also reflects an emotional backlash, from dashed hopes that the pandemic will soon end and life can return to normal.”
Mr Biden and his advisers are confident many of those issues will improve in the fall. They expect hiring to continue or accelerate at a rapid rate, lower workers’ wages, and boost consumer spending. They are hopeful that a firmer labor market will replace the fading stimulus from the president’s $1.9 trillion economic aid bill signed in the spring, and that the latest wave of the virus will not stifle growth significantly.
On Friday, he released new projections, which projected that after adjusting for inflation, growth would reach 7.1 per cent this year, its highest rate since 1983.
“Our approach is to look at an economy that is growing at historic rates,” Brian Deese, director of Mr Biden’s National Economic Council, said in an interview.
But there is mounting evidence that the coming months of recovery could be more halting and chaotic than administration officials predicted, potentially putting millions of left-wing workers in peril as their federal support dries up.
Private forecasters have beaten growth expectations for the end of the year, citing the spread of the delta version and the drag on spending from the nationwide end of increased unemployment benefits next Monday. Emerging research suggests that the end of those benefits may not immediately bring Americans back into the workforce to fill record levels of open jobs nationwide.
“People will be surprised by how much the economy is set to slide next year as stimulus kicks in,” said Jim O’Sullivan, chief US macrostrategist at TD Securities.
Administration officials acknowledge some potential hurdles. Some big city downtowns may never return to their pre-pandemic realities, and the economy will never be fully “normal” until the virus is completely under control. They stress that increasing the country’s vaccination rate is the most important economic policy the administration can adopt to accelerate growth and boost consumer confidence, which has plummeted this summer.
Understand the Infrastructure Bill
- One trillion dollar package passed. The Senate passed a comprehensive bipartisan infrastructure package on August 10, capping weeks of intense talks and debate over the biggest federal investment in the country’s old public works system in more than a decade.
- final vote. The final tally in the Senate was 69 in favor of 30. The legislation, which will still have to pass the House, will touch almost every aspect of the US economy and strengthen the country’s response to the warming of the planet.
- Main areas of expenditure. Overall, the bipartisan plan focuses on spending on transportation, utilities and pollution cleanup.
- transportation. About $110 billion will be spent on roads, bridges and other transportation projects; $25 billion for airports; and $66 billion for the railways, providing Amtrak with the most funding it has received since its founding in 1971.
- utilities. The senators envisioned $65 billion to help connect rural communities to high-speed Internet and sign up low-income city residents who can’t afford it, and to western water infrastructure. $8 billion included.
- pollution cleaningAbout $21 billion will be spent on cleaning up abandoned wells and mines and Superfund sites.
“I don’t want to put a timeline on this,” said Cecilia Rouse, chair of the White House Council of Economic Advisors. “It won’t feel completely normal until we have, whether we call it herd immunity, or a large fraction or percentage of the US population is vaccinated.”
“As soon as we conquer the virus,” she said, “we will achieve normalcy.”
The economy’s rebound this year has been stronger than predicted last winter, a result of an initial wave of vaccinations and a boost from Mr Biden’s stimulus bill. GDP returned to its pre-pandemic levels last spring, and retail sales have moved far beyond their pre-Covid path.
Yet the recovery remains uneven and rattled by a rare set of economic reforms. In some regions, consumer demand remains depressed. In others, spending is high, but a lack of supply – whether for materials or workers or both – is driving up prices.
For example, the construction sector has recovered most of the jobs it lost early in the pandemic, and other industries, such as warehousing, have actually grown. But restaurants and hotels still employ millions fewer people than in February 2020. The result: There are more college graduates working in the United States today than when the pandemic began, but five million fewer workers without college degrees.
Complicating the problem, employment has declined further in larger cities than in smaller towns and rural areas, and has returned more slowly. Employment among workers without college degrees living in the largest cities has declined by more than 5 percent since February 2020, compared with about 2 percent for workers without college degrees in other parts of the country.
Even though millions of people are out of work, businesses across the country are struggling to fill a record number of job opportunities. Many businesses have blamed expanded unemployment benefits for labor shortages. If they are correct, a flood of workers should return to the job market when benefits run out after Labor Day. But recent research has suggested that benefits are playing a minor role in keeping people out of the workforce. This suggests that other factors are holding potential workers back, such as health concerns and child care issues, that may not subside as quickly.
Michigan sentiment data and a reduction in stimulus benefits suggest consumers may be ready to pull back spending further. But other data suggests Americans increased their savings during the pandemic, banking on previous rounds of government support, and could attract those funds to sustain spending for months to come.
Administration officials hope to raise consumers and workers by pushing Congress to pass two parts of Mr Biden’s long-term economic agenda: a bipartisan infrastructure bill and a larger spending bill that expanded tax credits for parents. could expand the U.S., subsidize child care and reduce the cost of drugs, among other initiatives.
“Our hope is that the new normal coming out of this crisis is not just a return to the status quo and the economy, which was not working for the majority of working families,” Mr. Deez said.
Virus remains the biggest wild card for Outlook. There is little evidence in government data that the proliferation of the delta variant has suppressed spending in retail stores. But air travel, as measured by the number of people screened at airport security checkpoints, has stalled in recent days after returning to nearly 80 percent during the same week in 2019.
Restaurant bookings on OpenTable, which almost returned to normal in June and July, are back 10 percent from their pre-pandemic levels. Data from Homebase, which provides time-management software to small businesses, shows a sharp drop in the number of hours worked at restaurants and entertainment venues.
Variant is already casting a shadow over the new school year, with some schools, including a middle school in Fredericksburg, VA, temporarily returning to virtual learning amid the new outbreak.
Urban cities, once hoped for a drop in activity, are facing prolonged delays in white-collar workers returning to their offices.
“Our No. 1 job is to bring back office workers—that’s the driver of the city,” said Paul Levy, president and chief executive of Center City District, a local business-development group in Philadelphia.
Mr. Levy’s group estimates that 30 percent of downtown office workers have returned to Philadelphia by now. It was hoping that number would jump to 75 to 80 percent after Labor Day, and built an advertising campaign around the idea that the fall would be a milestone in a return to normalcy. But now major employers like Comcast have delayed their return dates, worrying business owners.
Yehuda Sichel signed a lease for Huda, her gourmet sandwich shop in Philadelphia, on February 29, 2020 – two weeks before the pandemic sent its entire potential customer base indefinitely home.
He made it through the winter of the pandemic with takeout orders, holiday meal kits, and some creativity. On a snow day when many other restaurants were closed, a short-rib special helped them make the payroll during a particularly grim period. Last spring, the business began to improve, and Mr. Sichel invested in new equipment and a new kitchen floor in hopes of growing the business after office workers returned. Now he doubts he will see one.
“September was supposed to be a huge jump,” he said. “Now, September is going to be fine. I am sure we will see a little bounce, but not the doubling in business that I expected. “
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