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The $600 Unemployment Booster Shot, State by State – The New York Times

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Before the coronavirus, people receiving unemployment benefits in most states got, on average, less than half their weekly salaries.

Now, as millions file claims, many are poised to receive more money than they would have typically earned in their jobs, thanks to the additional $600 a week set aside in the federal stimulus package for the unemployed.

That calculation is based on an analysis of the so-called replacement rate, which is the share of a worker’s wages that is replaced by unemployment benefits.

Workers in more than half of states will receive, on average, more in unemployment benefits than their normal salaries

Unemployment benefitS less

than wageS

Actual replacement rate at the end of 2019

Estimated replacement

rate with extra $600

Mississippi went from replacing 31% of average wages to an estimated 119%

Massachusetts had the smallest change, from 43% to 93%

Unemployment benefitS less than wageS

Estimated

replacement rate

with extra $600

Actual replacement rate

at the end of 2019

Mississippi went from replacing 31% of average wages to an estimated 119%

Massachusetts had the smallest change, from 43% to 93%

Estimated replacement rate

with $600 additional benefit

Estimated replacement rate

with $600 additional benefit

Unemployment benefitS Greater than wageS

Unemployment benefitS Greater than wageS

Actual replacement rate in 2019’s 4th quarter

Note: Estimates use average weekly unemployment benefit and average weekly wages from the last quarter of 2019 and add $600 to the average weekly benefit.·Sources: Department of Labor; Ernie Tedeschi, Evercore ISI Research

Replacement rates for each state are determined by dividing the average unemployment payment by the average 40-hour-a-week salary of those who receive unemployment benefits. Ernie Tedeschi, a former Treasury Department official and an economist at Evercore ISI Research, combined the new stimulus relief with each state’s average unemployment payment at the end of 2019 to estimate how much their replacement rates would increase.

The Massachusetts replacement rate will increase the smallest amount, he found, though it still doubles. Mississippi will have an 88 percentage-point jump, meaning workers there earning an average wage will make roughly $130 more in benefits.

These estimates, which reflect what tens of thousands of people around the country may now receive, come with caveats.

As large portions of the economy remain closed because of the outbreak, rendering more than 26 million people without jobs in a matter of weeks, no one knows for sure how wages and benefits for those receiving unemployment might change as more people enter the ranks.

A provision of the stimulus package, for example, allows part-time and self-employed workers who would normally not qualify for unemployment to receive benefits. That will alter the makeup of the typical pool of people filing claims, not to mention the average benefit paid out.

The ultimate depth of the economic fallout from the virus remains unclear, as is the question of how long the government will be able to provide extra money to help workers who lost their jobs. And just because someone qualifies for unemployment doesn’t mean they will receive it quickly.

Why $600 a week?

When you add $600 to the national average unemployment payment — $371.88 a week at the end of 2019 — the replacement rate goes from 38 percent to almost exactly 100 percent. In other words, that amount is what it would take for Congress to replace what the average American worker receiving unemployment would have earned.

“I would never two months ago have ever thought of advocating for 100 percent income replacement,” said Michele Evermore, a senior policy analyst at the National Employment Law Project. “But then when the pandemic hit, it was very different. We needed a policy mechanism to do something that unemployment insurance doesn’t usually do, and that’s keep people home.”

Unemployment benefits are typically meant to keep people afloat but stay low enough to incentivize them to find a job. Now, when seeking work may be both fruitless and dangerous, the incentives have nearly reversed.

But if the goal is to replace everyone’s wages, why not do it in a manner similar to how other countries are paying large percentages of worker salaries to prevent layoffs? While state unemployment systems are revealing their lack of preparedness for a crisis of this scale, the United States didn’t have many options that already existed to quickly get money to the people who will need it, according to Ms. Evermore. “The unemployment insurance system is the system we have,” she said.

And a $600 flat amount, rather than one relative to each person’s income, on top of a state’s usual benefits, is perhaps the simplest possible policy to enact. “State programs are already crashing just under the weight of new claims,” Ms. Evermore said. “To have them have to reprogram their computers to recalculate how benefits are paid would be completely disastrous.”

The extra money will provide an uneven benefit

While an extra $600 a week is enough to replace 100 percent of the average national income, the added benefit will differ depending on where people are and what they typically earn. Ms. Evermore described it as “swinging an ax to hit an ant.”

A person who earns close to the average weekly wage will roughly get their salary replaced on unemployment, but low-wage workers who lose their jobs are more likely to end up making greater amounts than they were before.

These workers, many of whom work in hard-hit industries like restaurants and retailing, are also those who are more likely to be in urgent need of cash to pay for necessities. However, because minimum and maximum amounts of unemployment benefits vary by state, the proportion of people whose benefits could exceed their normal salaries will be vastly different by state.

Just over half of workers in Arizona, which had a relatively high minimum benefit of $172 before the crisis, are estimated to make more on unemployment than if they were still working, according to Noah Williams, the director of Center for Research on the Wisconsin Economy at the University of Wisconsin-Madison.

Smaller shares of workers stand to gain as much from unemployment benefits in other states, he found. Other factors, like the cost of living, will affect how far an extra $600 a week will stretch.

States with higher minimum weekly unemployment insurance benefits …

… tend to have a larger share of workers who make less in their jobs than they would on unemployment currently if they got the minimum benefit plus $600

More workers who make less than unemployment

States with higher minimum weekly unemployment insurance benefits …

… tend to have a larger share of workers who make less in their jobs than

they would on unemployment currently if they got the minimum benefit plus $600

More workers who make less than unemployment

Note: Includes those working in January and February 2020, as well as part-time workers but not the self-employed. Under additional provisions of the stimulus bill, some workers who previously were not eligible, mostly those who are part-time or self-employed, will now qualify for unemployment, but will receive half the average weekly benefit plus the $600.·Sources: Current Population Survey and the Labor Department, via Noah Williams, Center for Research on the Wisconsin Economy, University of Wisconsin-Madison

Despite the additional benefits, many people who qualify for unemployment have been stuck waiting to receive money as state systems struggle to process the sheer number of new claims. And as of now, the $600 weekly additional payments will expire at the end of July. Congress may opt to extend the deadline in a further stimulus bill if it seems that the economy is still struggling badly, though the cost of extending will add to the already high price tag of the policy.

States are paying their usual benefits while the funds for the $600 payments, as well as other unemployment benefits in the stimulus including expanding who will qualify and extending the duration by 13 weeks through the end of 2020, are provided by the federal government. As millions of people apply, the cost for both states and the federal government is enormous.

But Mr. Tedeschi said the $600-a-week policy, along with other relief measures that put cash directly in Americans’ pockets, like $1,200 payments for individuals and loans for businesses to keep staff on payroll, demonstrated a real commitment by the federal government to try to keep Americans afloat.

“Not only is it bold,” he said, “but in principle — we can argue about implementation — but in principle it’s actually bolder than what a lot of other advanced economies have done.”

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Economy

The US will need to spend trillions more as economy takes until 2022 to fully recover: CNBC survey – CNBC

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The economy could take one to two years to rebound to full strength and the Federal Reserve and Congress, having already committed historic sums to fight the coronavirus pandemic, will have to commit trillions more, according to respondents to the CNBC Fed Survey.

With the Federal Reserve’s balance sheet already at an unprecedented $6.45 trillion, the 36 respondents see it rising on average to $9.8 trillion. The additional trillions will be added by the end of the current quarter, the respondents expect. Congress, having already committed about $2.5 trillion, is seen putting in an additional $2 trillion.

“My guess is that the virus itself will largely disappear within a year, but that the structural social and economic impacts will be with us much longer,” John Kattar, chief investment officer at Ardent Asset Management, wrote in response to the survey.

Jack Kleinhenz, chief economist for the National Retail Federation, said, “The policy response has been appropriate, but policy takes time to work its way into the economy and targeted sectors. … Many small businesses stand at risk.”

Despite the massive relief, respondents still see the unemployment rate rising to 19%, hitting that level in August. It’s expected to decline only gradually, to 11% by December and to 7% by the end of 2021. That would leave it at about double the rate before the crisis.

Second quarter of 2022

“With spiking unemployment and rising business closures … the prospects of a sharp rebound (is) far outweighed by the more realistic prospect of a longer-term structural disruption,” said Lindsey Piegza, chief economist at Stifel.

A 33% plurality believes the economy won’t be fully restored until the second quarter of 2022. But 19% believe it will be back by year-end and another 19% believe it can happen even earlier, highlighting a wide range of views about the speed and strength of a recovery.

“During the pandemic, production and consumption have been largely deferred and not lost,” wrote Rob Morgan, director of market strategy at US Energy Advisors. “This leads me to believe the economy will experience a V-shaped recovery beginning in the third quarter 2020.”

On average, respondents see gross domestic product falling by 24% this quarter, followed by a rebound of 4.7% in the third quarter and another strong quarter in the fourth. It won’t be enough to make back the losses in the first half. For the full year, GDP is forecast to decline by 5%.

Mark Zandi, chief economist at Moody’s Analytics, said a vaccine is essential for the economy to gain traction. “Until then, any recovery will remain something of a slog, characterized by halting growth and high single-digit unemployment. And even then, the economy won’t be in full swing and fully recovered until mid-decade.”

The Fed funds rate is seen remaining at zero for the rest of the year and rise to 1.9% in 2021. The Federal Reserve concludes its two-day policy meeting on Wednesday. Answers for CNBC’s Fed Survey from investors and economists were collected Thursday to Saturday. 

The S&P is forecast to finish lower on the year at 2,844 than Monday’s close, and rise to 3,141 next year for a 9% gain by the end of 2021.

 “I think the risk markets are anticipating a faster return to normalized economic conditions than we are likely to see,” says John Ryding, chief economic advisor at Brean Capital LLC.

Among the risks: Respondents place a 61% probability on a second round of contagion in the fall and winter.

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White House reportedly considering another round of stimulus checks – Atlanta Journal Constitution

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As the U.S. economy slowly reopens, Americans across the country are still grappling with job loss, furloughs and economic uncertainty. To combat the continued financial struggles some are facing, a White House official says the administration is “studying carefully” another $1,200 payment to citizens.

White House economic adviser Kevin Hassett told the media the administration is determining whether to provide those who qualify another round of stimulus checks, according to NBC News reporter Geoff Bennett. The additional financial support could be included in a phase 4 deal.

 

No word on when the package would be presented the House, but, with the virus still looming, House Majority Leader Steny Hoyer told the media Tuesday that the House will no longer come back next week after speaking to House physician, according to a tweet by Politico congressional reporter Sarah Ferris

 “We made a judgment that we will not come back next week,” Hoyer told reporters.

While the new stimulus checks are being considered, some Americans have not yet received the first round of checks. The IRS began cutting stimulus checks in mid-April. As of this week, about 90 million people have seen the economic bump in their accounts, according to economic news site Market Watch

 The hope is that the checks, which average about $1,200 a piece, will encourage spending and quell the financial pressure to pay essential bills as the COVID-19’s impact has shuttered manufacturing plants, retail stores and limited business hours for dozens of companies.

»MORE: The US is reopening but ‘normal’ is still a ways off

The IRS had distributed about 88.1 million stimulus checks as of April 17 and paid out $157.96 billion, according to statistics released April 24. That’s more than half of the $290 billion put aside for direct payments to individuals in the $2.2 trillion bill called the CARES Act.

Consumer confidence is still low

The Conference Board Tuesday reported that its consumer confidence index tumbled in the month of April, as millions lost their jobs and others feared for the current and future work conditions. 

The Conference Board said Tuesday that its confidence index plunged to a reading of 86.9, down from 118.8 in March. The index is composed of consumers’ assessment of present conditions and expectations about the future. 

 The present conditions index dropped from 166.7, to 76.4, a 90-point drop that was the largest on record. The expectations index, based on the future outlook, improved slightly from 86.8 in March to 93.8 in April.

The numbers in the present conditions index “reflects the sharp contraction in economic activity and surge in unemployment claims,” said Lynn Franco, senior director of economic indicators at the Conference Board.

Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, said the confidence declines were worrisome because “consumers’ downbeat views about future income prospects can restrain consumer spending and the overall economy.”

Consumers drive about 70% of all economic activity in the U.S.

Many economists believe the country has already entered a recession that will be the largest economic disruption since the Great Depression of the 1930s.

The Associated Press contributed to this report.


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Goldman Sachs explains why stocks can keep rising even as a record-sized recession beckons – Business Insider

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  • Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, a Monday note from Goldman Sachs said.
  • An analysis of GDP forecasts from the bank found that investors tended to discount the next two years of macroeconomic performance.
  • Thus, metrics that focus only on growth over the next year “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global FX and EM strategy, wrote in the note.
  • Read more on Business Insider.

Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, according to Goldman Sachs.

An analysis by the bank using changes to gross-domestic-product forecasts found that investors typically discounted at least the next two years of macroeconomic performance, a Monday note said.

That means that metrics that focus only on growth over the next year — such as multiples based on 12-month earnings expectations — “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global foreign-exchange and emerging-markets strategy, wrote in the note.

While the coronavirus-induced recession is set to be the deepest contraction in modern history, it’s also likely to be the shortest, Pandl said. Many economists expect that, after a dip in 2020, GDP will rebound in 2021 and 2022. By early April, consensus GDP forecasts incorporated a virus hit, down 4% this year. But forecasts are for 4% growth in 2021 and 3% in 2022 — an unusual pattern, Pandl said.

Read more: Goldman Sachs recommends investors buy ‘quality at a reasonable price.’ Here’s are the firm’s top 10 stock picks that fit the bill.

That means that more disappointing data in the near term may not weigh heavily on markets, as activity is expected to snap back “relatively quickly,” Pandl wrote. “The depth of the downturn matters much less than the duration of the recovery,” he said.

Goldman’s analysis came amid a stock-market recovery from March 23 lows. As US states weigh relaxing strict lockdown measures designed to curb the spread of COVID-19, stocks have slowly gained on optimism that the economy will soon reopen. From March 23 to Monday’s close, the S&P 500 gained about 29%, but it was down about 15% from all-time highs in February.

Still, many economists disagree that any rebound after the coronavirus pandemic will be a quick one. Instead of the sharp V-shaped recovery that Goldman is suggesting, many expect a rebound to take a softer U shape.

Read more: The manager of the best small-cap fund of the past 20 years explains why he’s betting big on a consumer recovery — and shares his top 4 stock picks in the struggling sector

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