The news cycle has quickly turned, as it often does, and the past week was one where the national focus has switched from the coronavirus outbreak to the police killing of George Floyd in Minneapolis, and broader issues of social justice. Peaceful protests took place in many cities, but so did riots, shocking the country. Nevertheless, the week ended with a surprisingly much less bad than expected jobs report. See page 1.
While an unemployment rate of 13.3% was lower than anticipated it remains higher than any other recession since WW II. The focus in Washington will now turn to whether or not, and on what time frame, to extend programs that softened the blow of closing down most businesses in the nation.
Prior to Memorial Day the House passed a $3 trillion Phase 4 coronavirus relief package; it arrived in the Senate with Republicans taking the position that time was needed to see what the impact of earlier measures had been. Clearly today’s jobs report will strengthen the hand of those who oppose another large relief package.
Even prior to the jobs numbers a consensus appeared to be developing among Republican Senators that another $1,200.00 stimulus check, contained in the House bill, was not the right action; but there was backing for some action to extend the supplemental unemployment payments that was included in the CARES Act approved in the spring.
With 40 million Americans out of work there continues to be support for the supplemental payments but a view that $600 a week may be too much. The non-partisan Congressional Budget Office reported that the $600 level puts many low-income workers in a position of earning more on unemployment than returning to work. There are preliminary conversations to extend the supplemental unemployment benefit past its July 31 termination date, but at a lower level. There is also an idea, championed by some Republicans, to provide a return to work bonus that would continue the supplemental payment, of perhaps $400 a week, for a period of time after the low wage employee returns to work.
Last week the Senate gave final approval to legislation that improves the Payroll Protection Program (PPP) for small businesses. The amendments to the current law would allow small businesses to pay only 60% rather than 75% for payroll expenses in order to convert the loan to a grant, and importantly extended from two to five years the payback period for PPP money that is not forgiven and becomes a loan.
The civil unrest also took attention away from the friction between the US and China; but as the President’s poll numbers continue to deteriorate, he is likely to focus on the role China played in allowing the virus to spread. As I have written it is a tough issue for the President as his re-election strategy relies on strong support from farmers in key battleground states. The Chinese government obviously knows this as last week directed the state purchasing agents to reduce soybean purchases from the US. China trade and the future of the Phase One deal signed by President Trump will be key policy points in the coming weeks.
