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After a rollercoaster ride in the spring and summer, the U.S. economy appears to be entering a flatter stretch ahead of the pivotal 2020 presidential election.
The thundering economic rebound that followed a historic recession in the wake of the coronavirus pandemic has shifted into a more lukewarm recovery. Consumer spending has slowed, business investment is soft, and the number of people going back to work has tapered off.
Read:U.S. retail sales climb in August for third straight month, but momentum is slowing
And see: MarketWatch Economic Calendar
A slower recovery is evident in the number of people applying for unemployment benefits. After falling through most of the summer, new state and federal jobless claims appear stuck around 1.4 million or so a week. More big companies have announced layoffs and thousands of small businesses have closed permanently.
Consider this: The government reported that nearly 30 million people were collecting unemployment benefits at the end of August. Even if that number is vastly overstated by double counting and other oddities — as some economists contend — it’s still far higher than the 1.4 million people who were receiving unemployment compensation before the pandemic struck.
In any case, the spate of layoff announcements and persistently high unemployment seems to have dampened the optimism of consumers. A closely followed daily survey of consumer confidence conducted by Morning Consult has flat-lined in September.
See:MarketWatch Economic Recovery Tracker
With confidence shaky, so many people out of work, and the coronavirus still spreading, the U.S. can’t recover more rapidly, economists say. Many businesses face ongoing restrictions on occupancy while millions of Americans continue to practice social distancing and shun normally crowded places such as airports, malls and hotels.
“As gains in confidence slow, consumers tend to tighten their wallets, directly affecting consumer spending, which in turn makes it harder for businesses to justify adding to or even maintaining their current workforces,” said economist John Leer of Morning Consult.
The end of massive federal aid for the unemployed and small businesses also appears to have tapped the brakes on the speed of the recovery. The economy didn’t suffer as badly as many predicted when federal aid dried up — it’s proven to be quite resilient — but incomes for millions of Americans were sharply reduced and some businesses were left high and dry. They can’t keep employees on payrolls when demand is still well below pre-crisis levels.
The odds of more government help before the November election aren’t very high, either.
Democrats and Republicans are sharply divided over how much to spend and have made no headway in negotiations since the last aid packaged expired in July. President Trump used an executive order last month to temporarily add $300 to weekly benefits for the unemployed, but it’s already starting to run out.
Read:U.S. jobless claims fall, but the economy is still suffering lots of layoffs
So what’s going to get the economy moving faster — or at least plowing ahead?
A declining number of coronavirus cases has allowed states to ease restrictions and give businesses more leeway to operate.
Schools, colleges and other organizations, meanwhile, are trying to reopen and return to some semblance of normalcy. Witness the Big 10’s decision to play college football again.
“All of this recovery that we’ve seen is in a context where people are still at risk of catching it and yet were able to resume lots and lots of economic activities,” Federal Reserve Chairman Jerome Powell noted after the central bank’s latest evaluation of the economy this week.
The Fed, for its part, made it quite clear for the umpteenth time that it plans to keep U.S. interest rates at record lows for at least three more years — if not longer. That’s giving a boost to sales of new cars, homes and other interest-rate sensitive purchases, further strengthening the recovery.
Read:Fed aims to keep a key U.S. interest rate near zero until end of 2023
And most important, people are going back to work. Not as fast as they did earlier in the recovery, but the economy is still adding more jobs than it’s losing.
As long as that’s the case, the U.S. is unlikely to slip back into another economic malaise.
