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Millions face a financial cliff as grim economic news keeps on coming

By Masao Suzuki

San José, CA – On Wednesday, November 25, the U.S. Department of Labor reported that new claims for regular state unemployment benefits increased for the second week in a row, up 30,000 to 778,000. This is the highest level in five weeks and the first time since July with back-to-back increases. Adding in the weekly new claims for the federal Pandemic Unemployment Assistance or PUA for the self-employed and gig workers, almost 1.1 million people sought government aid in the recession.

For the first time in almost two months, the total number of people receiving government unemployment benefits across all programs rose. For the last seven months, there has never been fewer than 20 million people getting aid, which is more than 12% of the those who are working, or who are not working and are looking for work.

More bad news on the economy also came in the report on October income and spending. Personal income sank 0.7% as compared to September. This was mainly due to less government unemployment aid, showing that many people who lost their jobs in April are losing their benefits, as opposed to getting jobs. Personal spending rose, but at less than half the rate of growth as September.

Weighing on the economy is the surging pandemic, with an average of more than 175,000 new infections a day for the last week. In the last day, more than 2300 Americans died of COVID-19, within striking distance of the all-time high set in April. A record 88,000 people are now hospitalized with the coronavirus, straining hospitals across the country. While many field hospitals are being built, the problem is lack of staff, especially those who are trained.

Despite a warning from the Centers for Disease Control not to travel, 4 million people have already taken to the air for the holidays. Many doctors and public health workers are worried about a spike in the middle of the surge that could overload the health care system and lead to a rising death rate at the end of the year.

On top of the growing health crisis, almost two-thirds of those collecting benefits, or more than 13 million people, face a financial cliff in a month. On December 26, the federal PUA and the federal Pandemic Emergency Unemployment Compensation, for people who have hit the six-month time limit for regular state benefits, will wind down. While the Democrats in the House of Representatives passed a bill to extend benefits back in May, the Republicans in the Senate have opposed this and still haven’t passed a bill to be able to negotiate with the House.

In addition, the moratorium on evictions, the extension of student loan payments, and the forbearance of home mortgages are also running out with the new year. According to a survey earlier in November, there are almost 30 million tenants behind on their rent, which could lead to millions of evictions in 2021. State and local governments also face hundreds of billions of dollars in budget deficits that have to be closed over the next 18 months. These will lead to even more cuts and job losses, especially in public schools and colleges.

The Trump administration is now cooperating with President-elect Biden in a transition. But the Trump team seems to be going out of its way to hurt the economy before the administration ends. Last week, Trump’s Treasury Secretary Stephen Mnuchin ordered the Federal Reserve to return billions of dollars to the Treasury. This money guarantees against any losses from three Federal Reserve lending programs. The Fed’s lending to large corporations, medium size businesses, and state and local governments backed by the Economic Stabilization fund will now have to wind down just as the economy turns down again and pandemic relief programs are coming to an end.

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