It’s hard to say if a presidential election 23 days in the future will light a fire under negotiations between Congress and the White House over a stimulus package. Perhaps it will slow things further, cementing what’s already been a months-long stalemate on Pennsylvania Avenue.
One thing’s for sure: Without another federal infusion, unemployed workers and this beat-up economy will sink further into the depths. A breakthrough simply cannot wait until this contentious election is decided.
That was the message, in essence, of the president of the Federal Reserve Bank of Boston, who spoke to a virtual crowd organized by Milwaukee’s Marquette University on Thursday. “One of the reasons why it’s so important to get the fiscal stimulus is because the longer this goes on, the more likely it becomes permanent, the more likely it is that we find difficulty actually getting many of those people back into the labor market,” Boston Fed President Eric Rosengren said in his speech covered by State House News Service.
While the Massachusetts unemployment rate is slowly tipping in the right direction — it was 11.3% in August, back from nearly 18% in June — Rosengren and others caution there’s more than meets the eye in those statistics.
Most jobless workers in the spring had been out of work for fewer than five weeks. As of last month, the majority of jobless Americans had been out of work for at least four months, if not longer. As a result, more workers are giving up the search, adding significantly to the ranks of long-term unemployed.
A lingering pandemic, and an economy that continues to slump, will harden the unemployment effect with people frozen in place. They leave the workforce not only when they cannot find a job. They do so to care for sick relatives, elderly parents, children who are out of school, or infants and toddlers for whom there is no daycare.
The News Service cites other economists who point out that the COVID-19 slump, unlike most recessions, has shut off certain business sectors entirely, so that people who’ve been furloughed simply cannot find a new job.
None of this bodes well for the Merrimack Valley and North Shore, which report some of the state’s highest unemployment rates. Lawrence’s 23% jobless rate in August was markedly better than a month earlier, when it was 31%. But the city still had the worst unemployment of any community in Massachusetts. Lynn wasn’t far behind, with unemployment approaching 17%.
A new federal stimulus is no cure-all or ramp out of this. But like sandbags holding back a flood, it serves to keep this problem from getting markedly worse. For one thing, it can help some households and small businesses stave off bankruptcies that would have ripple effects for creditors and suppliers. Federal Reserve Chairman Jerome Powell noted as much in a speech last week, in which he argued for an infusion from the federal government to shore up a recovery that is “far from complete.”
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said.
Another round of stimulus coordinated between Congress and the White House may be easier said than done. Amid the initial spread of COVID-19 last spring, the government also spread funds, including the $2.2 trillion CARES Act. But since May, support for a follow-on package has been uneven. The House has passed two bills — one that died in the Senate, the other rejected by President Donald Trump. The only meaningful relief in that period came when Trump shifted money from the Federal Emergency Management Agency to shore up unemployment benefits.
The president said last week another stimulus would have to wait until after the election. He reversed course not long after, suggesting that negotiations could bear fruit before then. Among the sticking points is whether the next round should include money for the airline industry.
It's an issue that needs fast resolution. As the country's central bankers note, the anemic economy is in desperate need of infusion. We cannot afford to wait another five weeks before we find out what will happen.