Americans are cutting back on spending as they plan for a recession that might not end until the coronavirus pandemic is over.
Angela Lang/CNET
President Donald Trump’s call for an end to stimulus negotiations on a new stimulus bill presented a wrinkle in the story of the US economic recovery from the deep financial fissures of the ongoing coronavirus pandemic. His tweet a few hours later urged Congress to pass several of the stimulus measures that had been part of those very discussions. Neither political analysts nor many of the millions of Americans who’ve suffered financial calamity due to the pandemic seem to know what to make of the president’s contradictory messaging.
The relief package under negotiation was expected to include a second stimulus check and renewed enhanced unemployment benefits. Federal Reserve Chairman Jerome Powell said the economy could experience “tragic” results without significant government support. Without that direct assistance, many of those hit hardest by the recession may not get any kind of financial relief until at least 2021. How that might affect the US’s already precarious recovery remains to be seen.
Until now, economic bounce-back has been a mixed bag, with stark divisions along socioeconomic lines. Case in point: Although the stock market and average US household wealth are both at near-record highs, the US may soon face a food bank meal shortage with potentially catastrophic repercussions for the nation’s record-setting 22.3 million adults who don’t have a reliable source of food. More than 12% of these households include children, according to US Census data.
Economists indicate that lockdown measures have produced a K-shaped recovery in which well-educated, white-collar professionals and the industries that cater to them have rebounded faster than people whose income is tied to public life, like restaurant and hotel employees, who remain largely unemployed or underemployed.
What does the road to economic recovery look like from here? We’ve put together the latest news about the coronavirus recession, where to find help, what makes a recession and the government’s response. This story is intended as an overview, not financial advice. It updates as the situation develops.
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Next stimulus checks: What to expect
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Latest coronavirus recession news
- Trump unexpectedly and abruptly ended negotiations on a second stimulus bill Oct. 6 in a series of tweets that said, in part, “I have instructed my representatives to stop negotiating until after the election” and that he wasn’t interested in bailing out Democratic-led states.
- Three hours later, Trump seemed to contradict himself by demanding Congress pass several key provisions of the proposed stimulus package, including financial relief for the beleaguered airline industry and $1,200 direct payment stimulus checks.
- Stimulus is needed, Fed Chairman Powell stressed hours before Trump’s tweets. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
- The number of people out of work for more than 27 weeks increased to 2.4 million in September, a 32.5% jump from the previous month, according to data released by the Department of Labor.
- Office rents are tumbling across the country, as companies have moved to a predominantly remote workforce, with San Francisco experiencing the steepest declines.
- Housing prices continue to skyrocket in perhaps the most unexpected repercussion of the “COVID economy,” with experts predicting another six to 12 months of surging prices before supply and demand balance out again.
- The coronavirus recession has disproportionately affected women, with four times as many women dropping out of the labor force compared to men. Black Americans are also disproportionately impacted.
- United and American airlines have furloughed over 32,000 employees, while Southwest has proposed pay cuts to avoid similar furloughs, as dwindling profits on account of reduced travel spending have nearly crippled the airline industry.
Where to find additional personal finance resources
If you’ve experienced financial hardship as a result of the coronavirus recession, here are some tools to help you regain your financial balance.
America’s decade of growth is over. Now we face an economic plunge.
Sarah Tew/CNET
When will the COVID recession end?
From an economist’s point of view, a recession ends when certain market requirements are met, which some estimate may happen about midway through 2021. From a personal point of view, you might wonder most about your ability to work, pay your bills and secure your financial future.
Economists and health experts agree the economy won’t fully recover until the coronavirus pandemic is contained — without triggering another wave of infections when lockdown measures are eased. That’ll happen either through herd immunity, an effective treatment for COVID-19, a coronavirus vaccine or some combination of all three.
Several vaccine candidates have shown promise in human trials. Even so, most people won’t receive one until sometime next year.
How the government has tried to prop up the economy
The $2 trillion stimulus package passed as part of the CARES Act in March represents the US government’s first attempt at thwarting a recession. The economic relief law included stimulus payments of up to $1,200 for most US taxpayers, as well as a loan program for businesses to keep paying their employees.
So far, efforts to pass another stimulus package have stalled, with most analysts’ hope for a deal prior to the November election dwindling by the day.
The Federal Reserve, however, has indicated it will continue to hold interest rates close to 0% until 2023, which often has the effect of encouraging more borrowing, which leads to more spending — and more spending generally improves the economy.
Spending money at locally owned businesses (while wearing a mask and maintaining social distancing) can help keep your economy afloat during the recession.
Jessica Dolcourt/CNET
How can I help others?
It’s easy to feel helpless, but if you’re feeling financially secure or have time to give, there are ways to make a difference. My CNET colleague Katie Conner has some excellent recommendations for things you can do to help your local community and businesses, including no-cost contributions like online volunteering or donating blood, as well as ordering take-out or delivery and buying restaurant gift cards.
Other local businesses like bookstores, gardening centers, toy shops and boutiques may have a website where you can support them with a curbside order.
The best advice I’ve heard so far about how you can individually help prop up the economy is this: Spend to the best of your ability and within your means.
