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Stocks fall for second month in a row as economic storm clouds gather

By Masao Suzuki

San José, CA – For the second month in a row, U.S. stocks fell in October. The drop in stock prices sped up, with both October and the last week being the worst month and week for the stock market since March. The broadest stock market index, the S&P 500, is now down nearly 9% from its record high in early September.

Despite some positive economic news on unemployment claims and Gross Domestic Product this past week, the economy still remains in a deep hole. There are still more than 22 million people getting government aid for unemployment, more than 12 times the number before the recession began. GDP remains down 2.9% from a year ago, the second worst on records going back to World War II. Only the bottom of recession and financial panic of 2007-2009 was worse.

The economic road ahead has darkened to the point that Wall Street can no longer look back to the bounce in the economy when pandemic restrictions eased. COVID-19 is back in the news, with almost 100,000 new infections in the last 24 hours, more than the total infections in China where the pandemic began in that (much more populous) country. As the number of new infections go up, hospitalizations and death follow. In the last two weeks infections are up 42%, hospitalization for COVID-19 rose 25%, and deaths went up 16%.

States and cities are ordering businesses to close again in the wake of rising numbers, and more and more hospitals are close to not being able to treat all the COVID-19 patients. While they are trying to have a more targeted approach to business shutdowns than in the spring, it is not sure whether this will work, as the same policy in the U.K. has failed to stop the rising tide of infections. Many Republican local officials are resisting public health measures like wearing masks in the worst-hit areas. Donald Trump, Jr. even complained that COVID-19 deaths are “almost nothing,” as the daily number came close to 1000 that same day.

Another problem is that Republican-led Senate dragged its feet on passing more economic relief for the pandemic and recession. The Senate has not passed a single bill since the CARES Act in March. In contrast, the Democratic-led House of Representatives passed an additional aid package in May, and then another with less aid in October in an attempt to compromise with the Republicans. Republican Senate leader Mitch McConnell has promised to take up more relief next year.

But that will be too late for tens of millions of Americans. December 26 is last day that payments for the federal Pandemic Unemployment Assistance for self-employed and gig workers, and for the federal Pandemic Emergency Unemployment Compensation for those whose regular unemployment aid has run out, usually after six months. Right now there are 14 million people who will lose their aid, more than 60% of the total getting government economic help.

The Center for Disease Control eviction moratorium expires on the first Monday in January. While landlords have been illegally evicting tenants, the moratorium has held back a tsunami of evictions, as there are 30 to 40 million tenants now behind on their rent. The eviction moratorium has not stopped the rising debt that tenants owe landlords for back rent.

Last but not least, state and local governments are continuing to cut spending, which means fewer jobs and/or hours of work for government workers. Many had hoped to get aid from the federal government, which can borrow freely, while state and local governments have to raise taxes or cut spending. In the latest GDP report on the economy from July to September, state and local government spending was the only category that did not bounce back from the big drop during the previous April to June period. These job cuts will hit women workers especially hard as they make up 60% of the state and local government workforce. This recession has already been unusually hard on women workers as compared to other recession where typically male workers in construction and manufacturing are hit the hardest.

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