As economies begin to close again, with politicians citing increases in COVID-19 cases, retail sales have been on the increase. For instance, retail sales rose 18 percent in May, and 2.5 million jobs were added. Yet, the “experts” are warning that a depression might still come to pass if massive stimulus is not unloaded.
The Congressional Budget Office believes the American economy will create $8 trillion less in economic activity over the coming decade than it projected just a few months ago. A full recovery, they say, might not happen until the 2030s, and quite frankly, it isn’t too crazy to think one might never happen.
Today, we are looking at a household fiscal cliff. A recent report from The Federal Reserve said debt held by households increased nearly 4% in the first quarter, an increase took place before the onset of the pandemic.
Greg McBridge from Bankrate.com says approximately 1 in 6 households report having more debt now than before the crisis. “And that’s 1 in 4 for those that have suffered some sort of income disruption,” said McBride.
The New York Fed says the average debt per capita rose to $52,000 in the first quarter, a 3% increase by the year before. Stimulus packages in response to the so-called “The Great Lockdown” has staved off some of the cascading economic effects so far, according to economist Tim Quinlan of Wells Fargo. “April, for example, was the best month on record for personal income. That was the month that the stimulus checks got counted,” Quinlan said.
According to Quinlan, savings rates have also increased, given the restrictions on in-store shopping. And, some consumer credit has slowed, Warren Kornfeld of Moody’s said. “It’s down very, very significantly with auto, because auto sales are down,” Kornfeld said. He worries borrowing will start to rise as the government’s stimulus wears off.
Businesses, too, are going under. A new study projects more than 100,000 small businesses in the United States have shuttered for good due to The Great Lockdown.
“Overall, our results suggest that the pandemic has already caused massive dislocation among small businesses,” the study says.
State and local budget shortfalls are creating economic problems across the country. Washington State faces an $8.8 billion dollar budget shortfall.
Oregon is facing a $1 billion budget shortfall.
The Georgia Senate has advanced a state budget proposal to reduce spending by 11%.
Kansas is facing a budget shortfall of between $600-$700 million.
Halfway through 2020, Louisiana endures a $370 million budget shortfall. Ohio is facing a $2.4 billion budget shortfall.
With that said, numerous states-–Arizona, California, and Texas––have enacted more lockdowns. The initial stay-at-home orders created mass job loss with nearly 40-percent of low-wage workers losing their jobs since March.
Meanwhile, The CBO forecasts that American consumers will purchase, every quarter through the end of 2021, $300 billion to $370 billion less than they would have if the pandemic never happened.
Economists predict that 42 percent of people who lost their jobs will not return to their former employers.
Sales tax, real-estate-transfer taxes, income taxes, fines and fees are in free-fall. Overall budget at the local government level is expected to total $1 trillion next year. Michigan, which is looking down the barrel of a $3 billion budget gap in 2020 and $4 billion in 2021, has asked two in three state employees to accept a partial furlough. The New Jersey government has asked 100,000 public workers to move to abbreviated schedules. Schools have laid off about 500,000 people.