That's when the money runs out
Optimism is high and equity markets are riding high but today's jobless claims data was a reminder of what's to come.
Another 2.1 million Americans filed for unemployment insurance in the week that ended May 24, a reminder that the US is still bleeding. Continuing claims fell to 21 million from 25 million and the market is clinging to that, despite 3 million of that drop from curious falls in Florida and California.
Even 21 million job losses underestimates the amount of pain in the US. The Pandemic Unemployment Assistance program is a separate filing for self-employed and gig workers and an additional 11.1 million people have either received or filed for benefits in that program. Notably, 15 states still haven't reported any claims from that program, so once the paperwork is sorted it will rise.
That puts the US total close to 33 million or a full one-in-ten of the population.
What's helping to cushion the blow for those workers is the $600/week bonus in addition to the regular subsidy. That's $2400 per month and a major portion of what's supporting spending, at least for those who have been able to file and receive claims.
That program runs out on July 31 and at the moment (in some states one week earlier), it doesn't look like there is an appetite in Congress to extend it. Senate Majority Leader Mitch McConnell said the next round of stimulus -- if it comes -- is unlikely to extend the benefit.
Without the boost, the benefit falls to $378 a week, a 61% decrease in income. That will add heavy pressure to reopen and could cut the legs out of consumer spending.
At the moment, I get the sense that many of the out-of-work people in the US and elsewhere believe they will be back to work in July or August. Perhaps for half of them, that's true but unemployment will still be around 10% at year end and likely above 15% in August. For those who will still be out of work the question is this: Are they spending all the money right now or saving some of it?
