Archive for Ben Winck

America’s companies are struggling to hire workers back. It risks derailing the economic recovery.

San Francisco reopening
Manager Cynthia Martinez converses with guests at El Rio, located at 3158 Mission St., on Saturday, April 3, 2021, in San Francisco.
  • The labor market is on the path to recovery, but it's not a sure thing as the economy reopens.
  • Worker shortages are hitting some businesses, and experts warn of millions of jobs permanently lost.
  • Stimulus hasn't led to a spending surge yet, and Americans may sit on their huge savings pile.
  • See more stories on Insider's business page.

The positive March jobs report showed a country on the brink of full reopening, with good news for the economy around the corner. But just reopening isn't enough for a full recovery.

"There's no guarantee that the people whose jobs have been permanently eliminated will be able to find work elsewhere," Nancy Vanden Houten, lead economist at Oxford Economics, told Insider. "At the same time, there's a risk that labor force participation won't return to what it was prior to the pandemic. We might still experience shortages of workers."

Filling the hole in the labor market will take more than reaching a 3.5% unemployment rate and recouping every lost payroll, she said. The country was adding roughly 200,000 jobs a month before the pandemic, meaning the labor market will have to get back to the February 2020 level - and then some - to reach maximum employment.

The US began that climb in earnest last month, adding 916,000 nonfarm payrolls, blowing the median estimate of a 660,000 gain out of the water. The unemployment rate fell to 6% from 6.2%, matching economist forecasts, still far above the 3.5% pre-pandemic rate.

Experts are bracing for several months of outsize job gains as consumers thaw the frozen economy. But to Vanden Houten's point, pressures are now emerging on the supply side. While consumer demand shows signs of coming back, other signs point to an imbalance between job openings and Americans actively seeking work.

Jobless claims, however, have been volatile in recent months and give a clearer hint at deep scarring. Filings fell to a pandemic-era low of 658,000 in March but rose to 744,000 last week, signaling persistent challenges in hiring.

Supply strains and lagging cities present new challenges

Some of the world's top economic policymakers are warning of long-term scarring of the labor force that reopening can't address. Countries will need to "think well in advance" of what a post-pandemic economy will look like so as to add jobs where they're going to be, Kristalina Georgieva, managing director of the International Monetary Fund, said in a Thursday video conference.

Federal Reserve Chair Jerome Powell echoed her remarks, noting that millions of Americans will struggle to find work as they acclimate to a permanently changed labor market.

"The real concern is that longer-term unemployment can allow people's skills to atrophy, their connections to the labor market to dwindle, and they have a hard time getting back to work," he said in the conference. "It's important to remember we are not going back to the same economy, this will be a different economy."

Even the businesses set to benefit most from reopening are running into snags. Staffing at full-service restaurants remains down 20%, or 1.1 million openings, from the year-ago level, according to data from the National Restaurant Association. Owners and managers interviewed by The New York Times attributed the persistent shortfall to a lack of available workers. Others said their former employees chose to stay out of the workforce and subsist on expanded unemployment benefits.

The country's most densely populated areas are also experiencing slow recoveries, government data shows. Los Angeles and New York City held the highest February unemployment rates of the 51 major metropolitan areas: 9.9% and 9.8%, respectively. This kind of high unemployment in densely populated cities is bad news for the economic recovery, as the longer that the engines of the pre-2020 economy lie dormant, the further away lies a return to a kind of "normal," unless a new normal rapidly takes its place.

The stimulus spending boost could be smaller than expected

The government acknowledged risks associated with weak spending and acted on them. The $1.9 trillion stimulus measure approved by President Joe Biden in March was the largest relief package to hit the US economy since the CARES Act was passed in the first months of the pandemic. Americans received support in the form of stimulus checks and bolstered unemployment benefits, two boosts set to supercharge spending and overall demand as the economy reopened.

Recent studies suggest that boost may not be be as potent as anticipated. Stimulus check recipients spent just under one-quarter of their latest relief payments, according to researchers at the Federal Reserve Bank of New York. That's less than the share spent from the CARES Act checks or the $600 payments issued in January.

About 42% of the payments were saved, the highest percentage of all three stimulus checks. Though those savings can be unwound over time, they do little to aid the recovery in the near term. The remainder of the checks is expected to go toward paying down debts.

"As the economy reopens and fear and uncertainty recede, the high levels of saving should facilitate more spending in the future. However, a great deal of uncertainty and discussion exists about the pace of this spending increase and the extent of pent-up demand," the team led by Oliver Armantier said.

Stimulus passed throughout 2020 already buttressed Americans' savings, and there's been little sign of that cash being put to use. Peoples' savings grew by $1.6 trillion since last March, according to the New York Fed, but that sum is largely staying in bank accounts instead of moving throughout the economy.

Americans who held onto their jobs haven't increased their spending activity even though their savings increased, the Fed researchers said in a Monday blog post. Limitations to how much people can dine out or go on vacation will also curb a surge in consumer spending.

"It is certainly possible that some of these savings will pay for extra travel and entertainment once the COVID-19 nightmare is behind us, but our conclusion is that the resulting boost to expenditures will be limited," the team said.

Outlooks remain strong. Banks are forecasting the strongest economic growth in decades, and the March payrolls report bodes well for near-term job gains. The president's $2.3 trillion infrastructure plan promises to create millions of new jobs if it can win ample bipartisan support.

But the path to a fully healed labor market remains riddled with downside risks. Trends in worker availability, consumer spending, and permanent scarring will determine whether the country can stage one of the fastest economic recoveries in history.

Read the original article on Business Insider

54 million people fell out of the global middle class last year as the K-shaped recovery went international

Brooklyn food pantry coronavirus
People line up outside a food pantry in Brooklyn on Nov. 12, 2020.
  • Roughly 54 million people fell out of the global middle class during the pandemic recession, Pew data shows.
  • About 152 million people sank into the lower-income class or into poverty, reversing years of improvement.
  • Poorer economies saw the biggest losses, adding to the global recovery's K-shaped trend.
  • See more stories on Insider's business page.

As economies turn toward reopening and recovery, the coronavirus' economic toll is coming into focus. The picture is incredibly bleak.

The distribution of COVID-19 vaccines presents a clear end to the pandemic, but new data from the Pew Research Center suggests that returning to pre-pandemic unemployment levels is only the first step toward a full rebound. The firm estimates that 54 million more people fell out of the global middle class in 2020 than would have had the pandemic not emerged.

The classification includes people who live on $10 to $20 a day, or those who earn roughly $14,600 to $29,200 a year. That spread straddles the US poverty line and is well below median earnings in advanced economies.

That decline would've been larger had China, which is home to more than one-third of the world's middle class, not avoided a recession, Rakesh Kochhar, senior researcher at Pew, said. Still, growth in that country has slowed significantly as it faces obstacles to vaccinating its huge population.

Separately, about 152 million people fell from the global upper and middle class into the lower class and poverty. Pew's definition of global poverty encompasses those living on less than $2 a day, or earning less than $2,920 a year for a family of four.

Like other aspects of the economic downturn, the pandemic's negative effects have driven an uneven, K-shaped recovery. Middle-class dropouts were most concentrated in South Asia, East Asia, and the Pacific, as those regions saw growth in that cohort stall well before the pandemic hit. The increase in those classified as "poor" was primarily seen in India and Sub-Saharan Africa, reversing years of progress and plunging the regions into new economic pain, Kochhar said.

The regional disparities reflect observations made by the International Monetary Fund in its latest economic projections. The organization expects emerging-market and low-income economies to "suffer more significant medium-term losses," as they lack the fiscal firepower to power a stronger recovery. Countries with large dependencies on the tourism industry also risk prolonged downturns, the IMF said.

"Recoveries are diverging dangerously across and within countries," wrote Gita Gopinath, chief economist for the IMF.

At the same time, data collected by Bloomberg show wealthier countries vaccinating 25 times faster than the world's poorest nations. Advanced economies snapped up doses throughout the fall, creating a shortage that further inflames the recovery's K-shaped trend.

To be sure, the pandemic only exacerbated trends seen for many years. Most of the world's population landed in either the low-income or poor groups before the health crisis, while high-earners made up the smallest group. Yet the virus's damage to service jobs, which are primarily staffed by minorities, low-earners, and women, widened the gaps.

That's not to say progress can't be made. The global middle-class population grew by 54 million people annually on average from 2011 to 2019. The pandemic only erased a year of gains at that pace.

Poverty, however, jumped by 131 million people in 2020 after falling at an average annual rate of 49 million people, according to Pew. The setback signals that, at the pre-pandemic pace of improvement, it will still take years to rebound.

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Billionaire JPMorgan boss Jamie Dimon says there’s an ‘extraordinary number’ of tax loopholes that help the rich, and he kind of sounds like Joe Biden

JPMorgan CEO Jamie Dimon
JPMorgan CEO Jamie Dimon.
  • An "extraordinary number" of loopholes help the rich but not the US economy, JPMorgan CEO Jamie Dimon said.
  • Dimon echoes the pitch from the Biden administration to pay for a massive infrastructure and jobs program.
  • Dimon, who mainly donates to Democrats, has long been rumored as a potential Treasury Secretary but has passed on the job.
  • See more stories on Insider's business page.

Tax policy has taken center stage in recent weeks. President Joe Biden is aiming to lift tax rates on wealthy Americans and corporations in order to offset the costs of his $2.3 trillion infrastructure proposal. Republicans have balked at the plan, arguing such changes cut into the country's global competitiveness.

One of the leading voices of Wall Street's center-left has weighed in, and he said it's time for a change.

Neither side is particularly right or wrong, JPMorgan CEO Jamie Dimon said Wednesday in an annual letter to shareholders, before going on to say that one side basically is.

A tax-code overhaul can create a more equitable and efficient economy following the coronavirus pandemic, he concluded, highlighting an "extraordinary number" of loopholes and exemptions in the tax code that aren't about competitiveness and cement economic imbalances that should instead be targeted.

The government should instead focus on redistributing income through tax credits that directly help lower- and middle-income Americans. Measures like the earned income tax credit and the child tax credit improve labor force participation and help economic growth, said Dimon, a billionaire worth $1.9 billion, per Forbes. Exactly that kind of redistribution was included in Biden's historic $1.9 trillion stimulus passed in March.

Broadly, he wrote that a tax overhaul can mean the difference between a robust recovery and a slowed rebound that leaves many Americans still struggling. The country should push for a tax code that enables collection of all taxes owed, is transparent and simple, and can be adjusted in times of growth and decline, he wrote. He was also scathing on the subject of tax loopholes.

Dimon says big business takes advantage of unfair loopholes

"Private equity, venture capital, and real estate still get carried interest, and sugar and cotton, for some unknown reason, still get government subsidies," he said. "Suffice it to say, industry gets its share of tax breaks and forms of protection from legitimate competition."

JPMorgan declined to comment.

Certain elements of Biden's tax proposals already stand to shift the balance away from industry. The president has pitched a corporate tax rate of 28%, up from 21% but still down from the 35% rate seen for decades. More recently, Treasury Secretary Janet Yellen proposed a global minimum corporate tax rate that aims to level the playing field and keep firms from fleeing the US for tax havens.

"We must remember that the concepts of free enterprise, rugged individualism, and entrepreneurship are not incompatible with meaningful safety nets and the desire to lift up our disadvantaged citizens," Dimon said. "If the wealthy paid more in taxes and the money was put to good use, they would be the main beneficiaries of a stronger economy."

The Wednesday letter isn't the first time Dimon has advocated on policy. The CEO reportedly turned down the opportunity to serve as President Donald Trump's Treasury Secretary in 2016. And when his name came up as a potential Treasury Secretary for the Biden administration, Dimon clarified he "never coveted the job."

That hasn't kept some influential names from backing the chief executive as a strong candidate for a government role. Legendary investor Warren Buffett said in 2012 that Dimon would be the best choice for a Treasury Secretary in President Barack Obama's second term, adding the CEO would be particularly adept at handling market problems in the wake of the financial crisis.

Although mainly a donor to Democrats in the past, Dimon has refused to identify with a single party. He told CNBC in 2019 that "my heart is Democratic but my brain is kind of Republican," although that marked significant progress from a time when he considered himself "barely a Democrat."

For the time being, no signs point to Dimon leaving Wall Street. Yet his latest annual letter suggests he sides with Biden on tax reform, albeit at a safely nonpartisan distance.

Read the original article on Business Insider

Biden’s stimulus plan went beyond what the Fed expected

Federal Reserve
  • President Biden's stimulus plan was "considerably larger" than the Fed expected, FOMC minutes showed.
  • Members also emphasized it will "likely be some time" before the Fed considers policy changes.
  • The $1.9 trillion measure, along with vaccination and reopening, boosted the Fed's growth outlook.
  • See more stories on Insider's business page.

The American Rescue Plan passed by President Joe Biden last month was larger than Federal Reserve policymakers had anticipated, according to minutes from the Federal Open Market Committee's March meeting.

Committee members rolled out a more optimistic outlook for the US economy on March 17 after concluding their two-day policy meeting. The lifted growth estimates incorporated lower COVID-19 case counts, vaccine distribution, and stimulus packages passed by President Donald Trump in December and Biden's own relief plan. Though some expected Biden's proposal to be watered down to garner Republican support, the fully intact $1.9 trillion plan's approval surprised those on Wall Street and, evidently, at the Fed.

"The size of the ARP exacted in March was considerably larger than what the staff had assumed in the January projection," the meeting minutes showed.

The new stimulus plan and easing of social-distancing measures contributed to expectations for "substantial" gross domestic product growth in 2021. Fed policymakers also anticipate continued vaccination will allow for lockdown measures to be relaxed even further and drive strong growth over the next two years, according to the FOMC minutes.

The Fed elected to hold interest rates near zero and maintain its pace of asset purchases in March. While the central bank's updated outlook hints at the strongest growth since the 1970s, it's still "not yet" time to consider tightening monetary conditions, Fed Chair Jerome Powell said in a March 17 press conference.

"The state of the economy in two to three years is highly uncertain and I wouldn't want to focus too much on the timing of potential rate increase that far into the future," he added.

The minutes published Wednesday shed more light on the Fed's plan to maintain its ultra-easy monetary policy stance. Meeting participants noted "it would likely be some time until substantial further progress" toward the Fed's maximum-employment and above-2% inflation targets would be met, according to the minutes. Powell has repeatedly cited "substantial further progress" as the threshold for when officials might consider shrinking its asset purchases.

Those fearing an unexpected pullback in Fed support can find solace in the FOMC minutes. Several meeting participants emphasized the importance of giving markets clear communication of how the central bank is assessing progress toward its goals, the minutes showed. The Fed will indicate "well in advance" when it is considering a change in its asset purchase plan, the minutes added.

The meeting notes underscore how the Fed is sticking to its message, Brad McMillan, chief investment officer at Commonwealth Financial Network, said.

"The big message from the Fed minutes is that the central bank is as unconcerned in private about inflation as it is in public," he said in an emailed statement. "There appears to be no hidden interest in higher rates, suggesting that rates will indeed remain low until unemployment drops down to pre-pandemic levels."

Read the original article on Business Insider

Biden’s stimulus plan went beyond what the Fed expected

Federal Reserve
  • President Biden's stimulus plan was "considerably larger" than the Fed expected, FOMC minutes showed.
  • Members also emphasized it will "likely be some time" before the Fed considers policy changes.
  • The $1.9 trillion measure, along with vaccination and reopening, boosted the Fed's growth outlook.
  • See more stories on Insider's business page.

The American Rescue Plan passed by President Joe Biden last month was larger than Federal Reserve policymakers had anticipated, according to minutes from the Federal Open Market Committee's March meeting.

Committee members rolled out a more optimistic outlook for the US economy on March 17 after concluding their two-day policy meeting. The lifted growth estimates incorporated lower COVID-19 case counts, vaccine distribution, and stimulus packages passed by President Donald Trump in December and Biden's own relief plan. Though some expected Biden's proposal to be watered down to garner Republican support, the fully intact $1.9 trillion plan's approval surprised those on Wall Street and, evidently, at the Fed.

"The size of the ARP exacted in March was considerably larger than what the staff had assumed in the January projection," the meeting minutes showed.

The new stimulus plan and easing of social-distancing measures contributed to expectations for "substantial" gross domestic product growth in 2021. Fed policymakers also anticipate continued vaccination will allow for lockdown measures to be relaxed even further and drive strong growth over the next two years, according to the FOMC minutes.

The Fed elected to hold interest rates near zero and maintain its pace of asset purchases in March. While the central bank's updated outlook hints at the strongest growth since the 1970s, it's still "not yet" time to consider tightening monetary conditions, Fed Chair Jerome Powell said in a March 17 press conference.

"The state of the economy in two to three years is highly uncertain and I wouldn't want to focus too much on the timing of potential rate increase that far into the future," he added.

The minutes published Wednesday shed more light on the Fed's plan to maintain its ultra-easy monetary policy stance. Meeting participants noted "it would likely be some time until substantial further progress" toward the Fed's maximum-employment and above-2% inflation targets would be met, according to the minutes. Powell has repeatedly cited "substantial further progress" as the threshold for when officials might consider shrinking its asset purchases.

Those fearing an unexpected pullback in Fed support can find solace in the FOMC minutes. Several meeting participants emphasized the importance of giving markets clear communication of how the central bank is assessing progress toward its goals, the minutes showed. The Fed will indicate "well in advance" when it is considering a change in its asset purchase plan, the minutes added.

The meeting notes underscore how the Fed is sticking to its message, Brad McMillan, chief investment officer at Commonwealth Financial Network, said.

"The big message from the Fed minutes is that the central bank is as unconcerned in private about inflation as it is in public," he said in an emailed statement. "There appears to be no hidden interest in higher rates, suggesting that rates will indeed remain low until unemployment drops down to pre-pandemic levels."

Read the original article on Business Insider

US home prices soared at the fastest rate since 2006 in February

House for sale US
A house's real estate for sale sign shows the home as being "Under Contract" in Washington, DC, November 19, 2020.
  • US home prices surged 10.4% year-over-year in February, the biggest such jump since 2006.
  • The market has been red hot during the pandemic, but affordability represents a new challenge.
  • Price growth will cool into 2022 as mortgage rates rise and price out more buyers, CoreLogic said.
  • See more stories on Insider's business page.

Everyone knows it's been hard to find an affordable house amid the pandemic, but as the data comes in, it's becoming clearer just how hard.

The answer: Extremely.

US home prices continued to rip higher in February as supply constraints across the country and outsize demand boosted competition.

Selling prices increased 10.4% in February from year-ago levels, marking the largest year-over-year gain since 2006, according to CoreLogic data published Tuesday. Prices rose 1.2% from levels seen in January 2021. Idaho and Montana saw the biggest jumps, with year-over-year gains of 22.6% and 19.5%, respectively, according to the financial analytics firm CoreLogic.

And the outlet sees another year of more expensive housing ahead, projecting prices will rise another 3.2% by February 2022. The end of the pandemic can ease constraints on supply, CoreLogic said. On the demand side, it expects the lack of affordable housing to cut into some potential purchases.

"The run-up in home prices is good news for current homeowners but sobering for prospective buyers," Frank Nothaft, chief economist at CoreLogic, said. "Those looking to buy need to save for a down payment, closing costs, and cash reserves, all of which are much higher as home prices go up."

The housing market was among the few hotbeds of economic activity throughout the coronavirus pandemic. The Federal Reserve's emergency rate cuts in March 2020 pulled mortgage rates to numerous record lows throughout last year, leading many to take advantage of more appealing borrowing costs. Prolonged work-from-home periods spurred moves from apartment-dense cities into suburbs, which also lifted housing-market demand.

The buying spree quickly snapped up most of the market's available supply, but that streak recently showed signs of slowing. For one, expectations for a strong economic recovery saw investors dump Treasurys in recent weeks, lifting yields on government debt and in turn leading mortgage rates to swing higher. Rates now sit at their highest levels since June after rising for seven weeks straight.

The turnaround in mortgage rates and soaring prices seemed to finally bite into the housing market's rally in February. Existing home sales fell 6.6% that month to the slowest rate since August, according to the National Association of Realtors. At the same time, supply remained a measly 1.03 million units, a level that would only satisfy two months of sales at the February rate. Should prices trend even higher, the red-hot market could cool even faster.

"Homebuyers are experiencing the most competitive housing market we've seen since the Great Recession," CoreLogic CEO Frank Martell said. "As affordability challenges persist, we may see more potential homebuyers priced out of the market and a possible slowing of price growth on the horizon."

Read the original article on Business Insider

The government’s $5 trillion stimulus gamble mostly paid off – but missed poorer Americans along the way

US capitol
The Senate side of the Capitol in Washington, DC.
  • The US' $5 trillion stimulus was largely effective but left some struggling, Fed researchers said.
  • Using the IRS to send checks left out 12 million people with income below the tax-filing threshold.
  • Improving aid programs can drive stronger recoveries this year and after future downturns, the team said.
  • See more stories on Insider's business page.

The government's bid to pad against the coronavirus recession was mostly successful, but there are lessons to learn from some key shortcomings, researchers at the Federal Reserve Bank of Minneapolis said.

Congress authorized roughly $5 trillion in spending on various economic relief measures since the pandemic began. Households received support through direct payments, a child tax credit, and expanded unemployment benefits, while businesses got a helping hand from the Payroll Protection Program and near-zero interest rates.

Economists largely agree that the various stimulus bills accelerated the recovery, but two economists found a handful of ways the policies missed their targets. As Krista Ruffini and Abigail Wozniak wrote in a working paper dated March 25: "There are several feasible adjustments that could improve the reach and efficiency of these programs in 2021."

The problem is with the delivery mechanism, specifically the Internal Revenue Service (IRS).

Sending checks through IRS and Social Security Administration infrastructure made for quick deliveries, but the agencies weren't able to easily identify the roughly 12 million non-veteran working-age Americans with income below the threshold for filing federal taxes, the team said.

The IRS created a tool for non-filers to petition for their stimulus payments, but the program still presented unnecessary hurdles. The agency should use information from other support programs like Medicaid and SNAP to identify some of those Americans and send checks appropriately, the economists added.

Similar difficulties emerged in distributing unemployment benefits. Language barriers or inadequate access to technology could've kept some populations from accessing the expanded benefits seen throughout the health crisis, the team said. Unemployment insurance claims would have been 23% higher if recipiency rates were the same throughout the state as they were in wealthier areas, the team said.

Other tenets of the support packages simply can't be evaluated yet, they added. Most states approved eviction moratoriums early in the pandemic to help struggling Americans avoid homelessness. The federal moratorium and state freezes are still in effect, but it's still too early to see whether the rules truly prevented evictions, according to the economists. Data on evictions and homes at the highest risk are scarce, as are statistics on how households covered other housing expenses like utilities.

Improving aid programs can drive a stronger recovery in the near term and avoid similar pitfalls in future downturns, the economists said.

"From a macroeconomic perspective, leaving out the most vulnerable households could have ramifications for the broader economic recovery, as these households have the highest marginal propensity to consume," they added.

Read the original article on Business Insider

The government’s $5 trillion stimulus gamble mostly paid off – but missed poorer Americans along the way

US capitol
The Senate side of the Capitol in Washington, DC.
  • The US' $5 trillion stimulus was largely effective but left some struggling, Fed researchers said.
  • Using the IRS to send checks left out 12 million people with income below the tax-filing threshold.
  • Improving aid programs can drive stronger recoveries this year and after future downturns, the team said.
  • See more stories on Insider's business page.

The government's bid to pad against the coronavirus recession was mostly successful, but there are lessons to learn from some key shortcomings, researchers at the Federal Reserve Bank of Minneapolis said.

Congress authorized roughly $5 trillion in spending on various economic relief measures since the pandemic began. Households received support through direct payments, a child tax credit, and expanded unemployment benefits, while businesses got a helping hand from the Payroll Protection Program and near-zero interest rates.

Economists largely agree that the various stimulus bills accelerated the recovery, but two economists found a handful of ways the policies missed their targets. As Krista Ruffini and Abigail Wozniak wrote in a working paper dated March 25: "There are several feasible adjustments that could improve the reach and efficiency of these programs in 2021."

The problem is with the delivery mechanism, specifically the Internal Revenue Service (IRS).

Sending checks through IRS and Social Security Administration infrastructure made for quick deliveries, but the agencies weren't able to easily identify the roughly 12 million non-veteran working-age Americans with income below the threshold for filing federal taxes, the team said.

The IRS created a tool for non-filers to petition for their stimulus payments, but the program still presented unnecessary hurdles. The agency should use information from other support programs like Medicaid and SNAP to identify some of those Americans and send checks appropriately, the economists added.

Similar difficulties emerged in distributing unemployment benefits. Language barriers or inadequate access to technology could've kept some populations from accessing the expanded benefits seen throughout the health crisis, the team said. Unemployment insurance claims would have been 23% higher if recipiency rates were the same throughout the state as they were in wealthier areas, the team said.

Other tenets of the support packages simply can't be evaluated yet, they added. Most states approved eviction moratoriums early in the pandemic to help struggling Americans avoid homelessness. The federal moratorium and state freezes are still in effect, but it's still too early to see whether the rules truly prevented evictions, according to the economists. Data on evictions and homes at the highest risk are scarce, as are statistics on how households covered other housing expenses like utilities.

Improving aid programs can drive a stronger recovery in the near term and avoid similar pitfalls in future downturns, the economists said.

"From a macroeconomic perspective, leaving out the most vulnerable households could have ramifications for the broader economic recovery, as these households have the highest marginal propensity to consume," they added.

Read the original article on Business Insider

US job openings climbed to 7.4 million in February on hopes of a spring economic rebound

Now Hiring
  • US job openings gained to 7.4 million from 6.9 million in February, according to JOLTS data.
  • Economists expected openings to hold at 6.9 million through the month.
  • The hiring rate rose to 4% from 3.8% as businesses prepared for reopening to lift demand.
  • See more stories on Insider's business page.

US job openings gained more than expected in February as daily coronavirus case counts fell from winter highs and vaccine distribution improved.

Openings increased to 7.4 million from 7.1 million in February, according to Job Openings and Labor Turnover Survey, or JOLTS, data published Tuesday. Economists surveyed by Bloomberg projected openings would hold steady at 6.9 million.

The reading marks a second straight increase and brings openings to their highest level since January 2019.

The health care and food and accommodation sectors counted for most of the gains, according to the report. The state and local government education industry shed 117,000 openings, the biggest decline seen that month.

The year-high level of openings signals businesses are gearing up to hire more as the economy reopens. February saw daily virus cases tumble to their lowest point since fall 2020. The average daily vaccination rate, meanwhile, surged to 1.7 million doses from 1.3 at the start of the month, according to Bloomberg data.

Still, the labor market has plenty of progress to make before returning to its late-2019 strength. The US hiring rate rose to 4% from 3.8% in February, hovering around levels seen before the health crisis. Yet the economy was still down roughly 10 million jobs at the end of that month, signaling the climb out of the COVID-19 recession could last into 2022.

About 1.4 Americans competed for each opening in February, unchanged from the figure seen one month prior. That compares to pre-pandemic levels of roughly 0.8, meaning there were more openings than job seekers.

Separations, which track quits and layoffs, jumped to 5.5 million from 5.3 million. Total quits rose by 51,000 to 3.4 million.

Layoffs and discharges gained by 51,000 to about 1.8 million. The layoff rate held steady at 1.2%.

The second month of 2021 also saw an uptick in nonfarm payrolls after months of meager improvements and unexpected declines. The US economy added 468,000 jobs in February, according to revised data from the Bureau of Labor Statistics.

More recent releases suggest job openings increased further last month. Nonfarm payrolls grew by 916,000 in March, beating the estimate for a 660,000-payroll climb and marking the strongest one-month gain since August. The report signals that, as vaccination continues and allows the economy to reopen, hiring will pick up further. Economists on Wall Street and in the Federal Reserve largely agree, with many anticipating the unemployment rate will decline to roughly 4.5% by the end of the year.

Read the original article on Business Insider

Americans have saved $1.6 trillion since the pandemic started and it poses little inflation risk, the Fed says

Capital One ATM
A man uses the ATM at a Capital One bank in Midtown Manhattan on July 30, 2019 in New York City.
  • Americans' savings rose by $1.6 trillion during the pandemic thanks to stimulus and weak spending.
  • Some experts fear households will quickly spend their savings and fuel runaway inflation.
  • Studies suggest most will hold onto the cash even after the US reopens, Fed researchers said.
  • See more stories on Insider's business page.

Gradual reopening and widespread vaccination have economists wondering how Americans will spend in a post-pandemic economy. Researchers at the Federal Reserve Bank of New York see little cause for concern.

Americans enjoyed a savings surge during the pandemic as government stimulus hit households and lockdown measures cut down on spending. Estimates suggest people held on to roughly $1.6 trillion in savings since last March, when the health crisis first slammed the economy.

The sum highlights the scale of the government's support throughout the coronavirus recession. Yet some experts fear that, if too much of these savings are spent too quickly, the recovery will be disrupted as rampant inflation takes hold.

Such a demand bounce is unlikely, professors and economists at the New York Fed said in a Monday blog post. For one, Americans who kept their jobs still haven't spent nearly as much as they would in a pre-pandemic economy.

"Increased purchases of furniture, electronics, and other goods have compensated only in part for this reduced spending on services," the economists said. "As a result, overall consumption has fallen for many households, even if their income is more or less intact."

The roughly $5 trillion in stimulus passed by President Donald Trump and President Joe Biden over the last year also contributed to the savings boom. Relief doled out in direct payments and expanded unemployment benefits was used to pay down debts and cover living costs, but some was tucked away as savings.

It's also possible that some households increased their saving habits as a precautionary measure due to uncertainty around how the economy would fare, the researchers said.

NYFed
Source: Federal Reserve Bank of New York.

The very nature of excess savings suggests they won't be unwound too quickly. Stimulus recipients spent roughly one-third of the government support, according to Fed estimates. The rest was mostly saved, likely by households that already enjoy a financial buffer. It's possible that circumstances change and force Americans to tap their savings sooner than expected, but the economy's steady recovery should lead habitual savers to keep holding on to their funds, the team said.

Even when the economy fully reopens and Americans have more ways to deploy their cash, the researchers don't expect a sudden rise in spending. Many are sure to dine out more often or take a vacation that wouldn't have been taken otherwise, but there's a limit to how much a household can boost its discretionary spending, the team said.

"It is certainly possible that some of these savings will pay for extra travel and entertainment once the COVID-19 nightmare is behind us, but our conclusion is that the resulting boost to expenditures will be limited," the economists said.

This conclusion - and likely outcome - is a key reason why, as Insider's Hillary Hoffower reported, a full economic recovery depends on the wealthiest Americans spending much more than they did over the last 12 months of the pandemic.

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