Tag Archives: CARES act

Low-income U.S. households are spending savings quicker than high earners: study

By Jonnelle Marte

(Reuters) – U.S. households across the board built up savings during the pandemic, but low-income households are burning through their cash more quickly than higher-income families and could be out of savings soon if more aid is not delivered, according to a study released on Wednesday.

By the end of October, the median low-income family spent 64% of the extra cash they accumulated this year compared with last year, leaving them with about $236 in extra cash, according to a report released Wednesday by the JPMorgan Chase Institute. In contrast, higher-income households lost just 38% of the cash cushion built up this year, and had a median $810 in savings, the study found.

“If these trends continue, we would expect low-income families to deplete their account balance gains sooner than their high-earning counterparts,” researchers noted in the report.

The JPMorgan Chase study showed that cash balances appeared steady on average after rising earlier this year, in line with a separate report released by the Federal Reserve last week showing that balances in cash, checking accounts and savings deposits rose over the three months ending in September to a record $13.4 trillion.

But a look at cash balances for the median household – which is not affected as much by households with abnormally high, or unusually low, account balances – showed a more volatile experience.

The median cash balance for checking account holders studied by JPMorgan Chase rose in the spring when the government distributed cash payments to most households – and balances have been declining since.

Those households could experience another substantial drop in income and spending at the end of the year when unemployment benefits are set to expire for millions of workers participating in pandemic programs created by the CARES Act, the researchers said.

Consumers have previously cut spending on non-durable goods by 12% after losing unemployment benefits, and those receiving jobless benefits reduced spending by 14% over the summer after a $600 weekly supplement to unemployment benefits expired at the end of July, the study noted.

Lawmakers have yet to reach an agreement on another round of aid. Some COVID-19 relief measures could be attached to a critical spending measure that must be passed by Friday to avoid a federal government shutdown.

(Reporting by Jonnelle Marte in New York; Editing by Matthew Lewis)

U.S. bipartisan lawmakers propose $908 billion COVID-19 relief bill

WASHINGTON (Reuters) – A bipartisan group of U.S. senators and members of the House of Representatives on Tuesday proposed a $908 billion COVID-19 relief bill that would fund measures through March 31, including $228 billion in additional paycheck protection program funds for hotels, restaurants and other small businesses.

State and local governments would receive direct aid under the bipartisan bill, the lawmakers said. Senator Mitt Romney, a Republican, said the plan contains $560 billion in “repurposed” funding from the CARES Act enacted in March.

The lawmakers, speaking to reporters, said they have not yet secured backing for their plan from the White House, Senate Majority Leader Mitch McConnell or House of Representatives Speaker Nancy Pelosi.

Their support would be essential for a compromise bill to advance in the House and Senate.

But it does contain provisions that Republicans have been pressing for: new liability protections for businesses and schools grappling with the coronavirus pandemic.

Pelosi and her Democrats would win a central demand: aid to state and local governments.

A compromise $300 per week in additional unemployment benefits would also be in the package, according to the lawmakers.

Pelosi and Treasury Secretary Steven Mnuchin were expected to discuss coronavirus aid and a must-pass government funding bill later on Tuesday.

(Reporting by Richard Cowan and Doina Chiacu; Editing by Franklin Paul and Chris Reese)

Treasury’s Mnuchin urges Congress to tap unused CARES Act funds for COVID relief

(Reuters) – U.S. Treasury Secretary Steven Mnuchin on Monday urged Congress to tap into $455 billion of unused emergency relief funds to fuel an additional, targeted round of pandemic economic assistance for American households and businesses.

“Based on recent economic data, I continue to believe that a targeted fiscal package is the most appropriate federal response,” Mnuchin said in prepared testimony to the Senate Banking Committee released ahead of a hearing scheduled for Tuesday. Mnuchin will appear alongside Federal Reserve Chair Jerome Powell.

“I strongly encourage Congress to use the $455 billion in unused funds from the CARES Act to pass an additional bill with bipartisan support,” Mnuchin said. “The Administration is standing ready to support Congress in this effort to help American workers and small businesses that continue to struggle with the impact of COVID-19.”

(Reporting by Dan Burns; Editing by Leslie Adler)

Trump or Biden’s big economic challenge: millions of struggling Americans

By Jonnelle Marte

(Reuters) – The winner of the race for the White House will face a generation of low-to-middle income Americans struggling to get back to work because of a health crisis not seen in more than 100 years.

Whether it’s President Donald Trump or Democratic challenger and former Vice President Joe Biden, the reality is grim: about half of the 22 million who lost their jobs during the pandemic are still out of work.

New hiring is slowing, dimming prospects for the low-wage workers hit hardest by job losses. Infections of the virus that killed more than 225,000 Americans are rising to new records. Hotels, transportation companies and food providers warn that more layoffs are coming, and the government aid that helped many pay the bills is long gone.

Securing a future for a vast, growing underclass “is the most important challenge America faces over the next few years, 10 years, 20 years,” said Gene Ludwig, a former comptroller of the currency under President Bill Clinton and author of “The Vanishing American Dream,” a book about the economic challenges facing lower and middle income Americans.

“We cannot sustain a democratic society that has these kinds of numbers of low and middle income people that aren’t able to have a hope for the American dream and live decently.”

Congressional Democrats and the Trump administration have been trying to negotiate a $2 trillion coronavirus aid bill, but many Senate Republicans object to the cost and question whether more stimulus is needed. A deal may not be reached until early 2021.

SAVINGS DRY UP

That’s going to be too late for some.

Direct cash payments and enhanced unemployment benefits established by the CARES Act, which added $600 a week to state unemployment benefits, lifted more Americans out of poverty in April even as unemployment soared, according to research by the Center on Poverty & Social Policy at Columbia University.

People receiving the enhanced benefits were able to spend more, build savings and pay off debt, according to an analysis by the JPMorgan Chase Institute.

But after the benefits expired at the end of July, poverty is once again on the rise – with the monthly poverty rate reaching 16.7% in September from 15% in February, according to the Columbia study. After a decade of decline, hunger is rising nationwide.

Lisandra Bonilla, 46, saved roughly a third of the enhanced unemployment benefits she received after she was furloughed in late March from her job at an employment agency in Kissimmee, Florida. “I had saved a lot because I didn’t know what was going to happen,” she said.

It was smart planning: in August her benefits were cut to $275 a week before taxes, the maximum in Florida, down from more than $800.

Bonilla returned to work part-time in late September, but now she is struggling to pay the bills on half her previous pay, and fears her savings will be gone by December.

If she isn’t hired full time soon, she needs to find another job.

“We’re trying to shovel ourselves out of the hole, but at the same time the hole is getting bigger,” said Wendy Edelberg, director of the Hamilton Project and senior fellow at the Brookings Institution.

Two factors are particularly worrying, she said. More than 420,000 small businesses shuttered between March and mid-summer, which is more than three times the typical pace, she estimates. And permanent layoffs are also on the rise, hitting 3.8 million in September from 1.3 million in February – similar to levels seen before the 2008 election.

THE LONGTERM UNEMPLOYMENT TRAP

Bishop Donald Harper has been on more than 50 job interviews since he was furloughed in March.

Harper, 55, a veteran chef, most recently oversaw five restaurants at an Orlando resort. But with occupancy still low, it’s not clear when he’ll get back to work.

Applications for jobs at super markets or in health care have also been fruitless.

“I can do anything and everything,” said Harper, who also serves as a bishop for a nondenominational church. He is struggling to pay for food and utilities on $275-a-week unemployment, and three months behind on his $1,900 a month rent.

“I don’t want to be homeless,” said Harper, who lives with two children ages 10 and 13. He has reached out to more than 20 groups seeking rental assistance, with no luck.

The United States has 2.4 million and growing “long-term” unemployed, officially defined as those who have been out of work for 27 weeks or more. Getting everyone back to work is crucial, but economists say these job seekers are at greater risk of dropping out of the labor market or taking lower paying jobs.

This week, the U.S. Commerce Department is expected to report that Gross Domestic Product surged in the third quarter, thanks in part to fiscal stimulus that kept U.S. workers afloat, but has mostly expired.

Now, people who are out of work or in low-wage jobs need rental support, direct cash payments and food assistance, as well as federal jobs projects and retraining programs, labor economists say.

If elected, Biden has pledged to raise the federal minimum wage, and roll out trillions of dollars in infrastructure and green energy programs. But he’ll need the votes in Congress to do it.

Trump has signaled support for more federal stimulus, but has offered fewer specifics on jobs.

Until help arrives, workers are struggling.

Rachel Alvarez, 44, a single mother of three in Naples, Florida, starts a new job this week as a server at a restaurant – her first time working since she lost her job in March.

Restaurant workers who depend on tips aren’t making much money, because business remains slow due to the coronavirus, she said. She hasn’t paid rent since June, and is still waiting to hear from the county government about a grant.

“I’m going to keep my head up, because if shit like this ever happens to my children I want them to keep their head up too,” said Alvarez.

(Reporting by Jonnelle Marte. Additional reporting by Andy Sullivan and Richard Cowan; Editing by Heather Timmons and Edward Tobin)

Strong retail sales boost optimism before U.S. election, but it may be short lived

By Jonnelle Marte

(Reuters) – In an ordinary presidential election, Friday’s retail sales report would have been a dream for an incumbent like Republican President Donald Trump. Headline sales topped expectations by a wide margin and spending was up from August in all but one of the major categories.

Still, this is no ordinary election. Despite the gains seen in September, spending in key sectors that suffered massive job losses during the pandemic, such as restaurants and clothing stores, remain deeply below last year’s levels.

The report from the Commerce Department offered a reminder that millions of Americans are still out of work, leaving them with less money to spend on dinners out or new outfits. Without a vaccine or effective treatment, many consumers also hesitate to head out to stores or restaurants where they may be exposed to the virus.

On the one hand, the retail report showed that overall retail spending is now above pre-pandemic levels. That is a sign that some people may have spent the $300 supplement the federal government temporarily added to unemployment benefits. Other people may have boosted spending after being called back to work.

If more people continue to see their finances improve, that could bode well for the economy and for the overall outlook people carry when they vote in the Nov. 3 election.

But some economists are also questioning whether the increase in spending seen in September will continue with virus infections rising, job growth stalling and government aid fading.

Enhanced unemployment benefits and direct cash payments distributed as part of the CARES Act made it possible for jobless Americans to boost spending and pad their savings. But much of those savings were spent in August after the supplement to unemployment benefits expired, according to a study released Friday by the JPMorgan Chase Institute.

The White House and Congress have yet to reach a deal on another package. Job growth is also slowing and the number of Americans filing new claims for jobless benefits reached a two-month high last week.

“The progress we’ve made, which has been better than expected, may be slowing,” said John Briggs, head of strategy for the Americas at NatWest Markets. “I don’t know how much it hurts Trump’s chances, but I don’t see how it can help him.”

(Reporting by Jonnelle Marte; Editing by Andrea Ricci)

Americans on COVID-19 jobless benefits spent more than when working, study shows

By Jonnelle Marte

(Reuters) – Americans who received enhanced unemployment benefits due to the coronavirus pandemic spent more than when they were working, a study released on Thursday said, adding to concerns about a steep fall in spending when the emergency benefits expire.

The $600 weekly supplement added to jobless benefits as part of the CARES Act helped unemployed households spend 10% more after receiving benefits than they did before the pandemic, according to research by the JP Morgan Chase Institute.

Researchers analyzed transactions for 61,000 households that received unemployment benefits between March and May. Spending dropped for all households as the virus spread and led to business shutdowns, but then rose when households began receiving jobless benefits, the study found.

That contrasts with a typical recession, when households receiving unemployment benefits usually cut spending by 7% because regular jobless benefits amount to only a fraction of a person’s prior earnings, the research found.

The analysis highlighted how the additional unemployment benefits are helping to prop up the U.S. economy and consumer spending after the pandemic led to a surge in joblessness across the country.

More than 30 million Americans are estimated to be receiving unemployment benefits – and they could be pushed off an income cliff when the supplemental benefits, which are due to expire at the end of July, are withdrawn.

“Our estimates suggest that expiration will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” the researchers wrote.

The data also reflected the financial pain faced by households that encountered big delays in collecting benefits after states across the country were overwhelmed by applications.

Households that had to wait several weeks for their first unemployment check to arrive cut spending by about 20%, the study found. Spending recovered after the checks arrived.

(Reporting by Jonnelle Marte; editing by Richard Pullin)

U.S. says Alaska, Delta, JetBlue, United, Southwest seek COVID aid

WASHINGTON (Reuters) – Five additional U.S. air carriers – Alaska Airlines, Delta Air Lines, JetBlue Airways, United Airlines and Southwest Airlines – plan to seek federal loans amid the novel coronavirus outbreak, the U.S. Department of Treasury said on Tuesday.

The airlines had signed letters of intent regarding the terms under which they could receive U.S. funds under coronavirus relief law known as the CARES Act, Treasury Secretary Steven Mnuchin said in a statement.

“We look forward to working with the airlines to finalize agreements and provide the airlines the ability to access these loans if they so choose,” he said.

Four other airlines – American, Frontier, Hawaiian and Sky West – had already sought out federal aid under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the department said last week.

National lockdowns amid the global coronavirus pandemic has crippled the industry, although travel has picked up in some areas as economies open up.

Airlines have until Sept. 30 to decide whether to take the loan and can furlough or eliminate jobs starting Oct. 1.

(Reporting by Susan Heavey; Editing by Doina Chiacu and Nick Zieminski)

U.S. Treasury to start distributing $4.8 billion in pandemic funds to tribal governments

By Andrea Shalal

WASHINGTON (Reuters) – The U.S. Treasury Department will begin distributing $4.8 billion in pandemic-relief funds to Native American tribal governments in all U.S. states on Tuesday, the Treasury and Interior Departments said in a joint statement.

Payments would begin Tuesday to help the tribes respond to the novel coronavirus outbreak, based on population data in U.S. Census figures, the statement said, while payments based on employment and expenditure data would be made at a later date.

Amounts calculated for Alaska Native Claims Settlement Act regional and village corporations, for-profit businesses that serve tribal villages in Alaska, would be held back until pending litigation relating to their eligibility was resolved, they said.

The decision frees up about 60% of the $8 billion in funds earmarked for Native tribes in the CARES Act, after delays caused by a legal dispute among the nation’s native populations over who is entitled to the aid.

Some tribes in the lower 48 states had sued to say the Alaska tribal corporations were not eligible for the aid since they were not tribal governments.

The Treasury and Interior departments have decided to proceed with disbursing some of the aid while the litigation continues.

Native tribes have been seriously impacted by the outbreak, with the Navajo Nation, which resides in Utah, New Mexico and Arizona, trailing only the hardest-hit states New Jersey and New York in terms of the highest infection rate, according to Bettina Ramon, with the People for the American Way think-tank.

Health disparities, higher rates of poverty and a lack of insurance make tribal groups especially vulnerable, she said, noting casinos, a big source of income in some Native communities, were also omitted from the federal Paycheck Protection Program.

Treasury would distribute the remaining 40% of the $8 billion based on the total number of persons employed by the Native tribes and any tribally-owned entity, the statement said, as well as the amount of higher expenses faced by the tribe in the fight against the virus.

Treasury would work with the tribes to confirm employment numbers and seek additional information regarding higher expenses due to the public health emergency.

The pending litigation had introduced additional uncertainty into the process of making payments to the tribes, but Treasury said it was working to “make payments of the remaining amounts as promptly as possible consistent with the Department’s obligation to ensure that allocations are made in a fair and appropriate manner.”

(Reporting by Andrea Shalal, Editing by Franklin Paul and Bernadette Baum)

Americans are spending coronavirus checks on rent and groceries

By Jonnelle Marte

(Reuters) – When Jessica Rosner saw the $1,200 coronavirus relief payment from the U.S. government was deposited into her bank account Wednesday morning, the furloughed behavioral therapist knew immediately how she would spend the cash.

The unemployment benefits she applied for two weeks ago have yet to come through. And Rosner, 23, who lives near Fort Lauderdale, Florida, still owed nearly $1,500 for April’s rent and about $200 for car insurance.

The “Economic Impact Payments” being issued under the $2.3 trillion CARES Act passed by Congress last month started landing in consumers’ bank accounts this week. The relief payments of up to $1,200 per adult and $500 per child are meant to soften some of the economic damage caused by the pandemic.

Americans’ lives have been upended by the crisis, with most schools and businesses closed, vacations canceled, and families mourning the more than 31,000 people killed by the virus.

The relief money is arriving in bank accounts as states across the country struggle to process unemployment claims filed by more than 22 million Americans over the past month, and helping some people cover the essentials.

“It’s going to get used quickly because there are so many people who need money right now,” said Claudia Sahm, a former Federal Reserve economist and now the director of macroeconomic policy at the Washington Center for Equitable Growth.

Preliminary results from a survey Sahm is conducting with Google and the University of Michigan suggest U.S. families plan to spend the money on essentials or pay off debt, Sahm said. That is the way stimulus checks were used during the financial crisis of 2008 and to counter an economic slowdown during the summer of 2001, she said.

Some people said they were planning to save the cash temporarily, an indication the payments may not lead to the immediate economic stimulation hoped for by the government.

Hyniah Herrin, 26, wanted to enroll in college this fall but put those plans on hold after she lost her two part-time jobs as a school bus driver and restaurant host in Philadelphia. The stimulus money landed in her bank account on Monday, and she’s holding on to it. “We don’t know when we’re going to be able to resume life,” Herrin said.

Steve Davison, 61, says the workload in his part-time job handling social media advertising for a forklift distributor hasn’t decreased because of the coronavirus outbreak. But Davison, who has not received a payment yet, said he is still living paycheck to paycheck and is worried about the future.

After he pays an old tax bill, he plans to hold on to the rest of the cash. “I’m just going to stash it because you never know what’s going to come up,” said Davison, who lives in Jersey City, New Jersey.

Treasury Department Secretary Steven Mnuchin said earlier this week that more than 80 million Americans would have the money deposited directly into their bank accounts by Wednesday morning.

Those who haven’t received the money can check their status and provide bank account information through a new “Get My Payment” app. Paper checks bearing President Donald Trump’s name on them will be sent out starting early next week to people who don’t use direct deposit.

(Reporting by Jonnelle Marte; Editing by Heather Timmons and Paul Simao)