The Jobs Market Is Shouting That We Need A Second Stimulus Package

Our economy is on the mend. So far, we’ve recovered more than half the jobs, three-fourths of the economic output (GDP), and seven-eighths of personal income (net of government support) that we had lost in the initial downturn.

And there’s been plenty of welcome economic news in the past few weeks. Both retail sales and the leading stock market indices are at record levels. Metals prices are soaring, signaling that businesses believe a global recovery is in sight. And perhaps most importantly, almost all of the leading indicators are glowing green, as documented in Hale Stewart‘s excellent summary in his article discounting the probability of a double-dip recession. Most economists seem to agree: the latest Wall Street Journal survey found the odds of another recession occurring in the next 12 months continue to decline and now sit at pre-pandemic levels.[*]

And yet, there is ample room for concern—and a clear need for another significant aid package. To be sure, we’re certainly in a much better place than we were at the beginning of the pandemic when the economy was in freefall, and Congress had to step in with a massive stimulus package to prevent an absolute economic meltdown. But dig just beneath the upbeat headlines, and the economic story isn’t nearly as positive.

Among the conclusions:

• Recent positive economic headlines and buoyant equity markets provide misleading pictures of current economic trends and the near-term outlook.

• Key labor market indicators show that the economy is already slowing sharply, well short of a full recovery, and risks actually turning down again this winter.

• Most worrying is the ongoing historic pace of layoffs and the growing share of long-term unemployed workers, magnified by the surging spread of COVID-19.

• A looming cutoff in unemployment benefits for millions of jobless workers would devastate household finances and further depress consumer spending.

• Another robust stimulus package is needed to help jobless workers and small businesses survive until the vaccine begins to restore normal economic activity in the spring.

This article was published on Seeking Alpha.