Without more unemployment assistance, economists’ fears will happen

Food insecurity has suddenly increased. Drive out the wave. People spend less money in shops and restaurants. More job losses.

According to leading economists, if Congress does not update any economic growth indicators, then this year may be the outlook for the US economy. Additional payment of $600 per week Provided legal services to unemployed workers on September 1.Legislators have known for months that the payment is due At the end of July, But deadlines have come and gone.Now, Republicans and Democrats in Congress Still deadlocked How much assistance should unemployed workers get.Over the weekend, President Trump Issue administrative orders A boost of $400 a week to unemployed Americans, but critics question it legal with logistics feasibility.

according to Latest installment our Periodic survey of quantitative macroeconomists,versus Global Market Initiative At the University of Chicago Booth School of Business, 32 economists we surveyed collectively believe that if payment is not renewed before September 1, the probability of a decline in personal consumption will increase by 75%. They believe that many other undesirable situations are more likely to happen:

Economists worry about the economic crisis without more aid

If federal unemployment benefits are not renewed at least in part by September 1, each of the following situations is more likely to occur:

Imagine average opportunity
Decline in personal consumption 74.8%

Increased food insecurity 63.4

Eviction wave 55.2

Increase in unemployment 53.5

More workers return to the labor force 43.2

A wave of mortgage defaults 42.9

A survey of 32 economists was conducted from August 7 to 10.

Source: 55/IGM COVID-19 Economic Survey

Economists also said that if Congress decides not to extend unemployment benefits in any form, the unemployment opportunities we see will be more likely than workers returning to work.This seems counterintuitive-a policy that seems likely to encourage more people to return to work will actually lead to more unemployment?but Recent research shows A weekly payment of $600 allows unemployed workers to continue to consume as usual while they are hired Still not back to normal In many industries. If the loss of excess money causes millions of people to reduce their spending, companies may suffer losses and lay off workers. “The net impact on work is hard to say-on the one hand, reduced spending means the loss of some job opportunities, but this should be offset to some extent by more people returning to work and finding new jobs,” Eric SwansonIs a professor at the University of California, Irvine.

We also asked economists what factors would make their forecast of the worst-case scenario for the fourth quarter GDP become a reality. We gave them a series of different scenarios and asked them to weigh the things that are most likely to cause their nightmares. They say that as a group, the lack of fiscal stimulus is almost as large as the second wave of serious COVID-19 infections.It is worth noting that lack of fiscal stimulus is greater than worry When we asked this question last time in mid-June, Although the level of concern about the second round of coronavirus has hardly changed.

The possibility of no stimulus exacerbates economists’ concerns

When setting the lower limit of the GDP forecast for the fourth quarter of 2020, economists gave weights for various scenarios

factor weight
The bad “second wave” of autumn 39.5%

No further fiscal stimulus measures 33.4

Low consumption expenditure 14.8

Vaccine development is slow 9.4

Weak banking or financial system 7.8

other 4.4

The weight is the average response to a survey conducted by 32 economists from August 7 to 10.

Source: 55/IGM COVID-19 Economic Survey

“It is clear that survey participants believe that federal UI supplementation is critical to the economic growth path for the rest of 2020.” Allan TimmermannHe is a professor of finance and economics at the University of California (San Diego) in San Diego. He has been investigating with FiveThirtyEight.

Overall, the survey shows that although economists believe that the economy may continue to improve in a year, they still have not seen a rapid recovery in 2020. (The latest monthly employment report released last Friday, Suggest the same. ) The consensus forecast of economists is that the unemployment rate in August is 10.1%, which is basically the same as in July. They predict that the decline in September will also be small, falling to more than 10%. Although the organization expects the unemployment rate to fall to 9.6% in December, the consensus forecast of the 10th percentile is 7.8%, and its 90th percentile is 12.6%. A year’s journey and how this will affect employment.

It is worth noting that this bleak outlook is more optimistic than the forecasts in previous surveys of economists. As early as mayFor example, economists estimate the median unemployment rate for December at 12%. “I think economists are surprised by the speed of the labor market rebound,” he said. Jonathan WrightProfessor of Economics at Johns Hopkins University. He has also been negotiating with FiveThirtyEight during the investigation.

But even their revised forecast is still frustrating. “Remember that the past 10% was the depth of a severe recession, and other measures in the labor market (such as participation and underemployment) are still very bad,” Wright added.

Therefore, although on the surface, the July employment report seems to have sent out good news on the surface, the survey clearly shows that there are many things that can plunge us into an economic downturn in the foreseeable future, especially if Congress is in a certain state. If you don’t take action at that time, it’s very fast. Menzie ChinnAn economist at the University of Madison-Wisconsin said the July employment report only confirmed his suspicions that the economic recovery is beginning to stabilize. Now, he believes that a W-shaped recovery (the economy has improved and will only collapse again) is still possible, and “the possibility of stagnation is increasing.”

Julia Wolfe (Julia Wolfe) contribution research.

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