Why The US Economy Needs Another Stimulus?

Why The US Economy Needs Another Stimulus?

The US economy needs another new stimulus package because the US Jobless claims, US retail sales confirm the economy is stalling. Democrats, Republicans, and Trump administration need to pay attention to the IMF warning about soaring US bankruptcies. 

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Stimulus Facts 

Stimulus And Bankruptcies

As I mentioned before, the number of corporates that are filling bankruptcies in the US is soaring. Today, the IMF has warned that small and mid-sized business bankruptcies are likely to triple if the US government does not support it. This really highlights the importance of the upcoming stimulus bill. 

US Retail Sales Data 

The US retail sales data has confirmed that the US economy has stalled, and it needs additional stimulus. The July US retail sales m/m number came in at 7.3% against the previous reading of 18.2%. Last month, in June, we experienced a massive improvement in this number, and that was because Americans were optimistic about the re-opening of the economy. Also, some had the money from stimulus checks that were sent out to them by the US government. But now they ran out of this fund, and the current job protection program is about to expire as well. The current retail sales number is drumming the beat loud and clear: the US economy needs stimulus help.

The US retail sales data has confirmed that the US economy isn’t experiencing the kind of recovery that they anticipated. The US has seen a surge in coronavirus cases since it re-opened its economy, and the impact of the current stimulus package is wearing off. 

Stimulus Checks: US Jobless Claims 

Congress needs to give the green light for more stimulus support for the US economy. Today’s US jobless claims data doesn’t have much good news for the US economy. The US initial jobless claims came in at 1.3 million against the forecast of 1.25 million. There was some silver lining in the continuing jobless claims data as it was better than the forecast and the previous reading. Actual came in at 18.06 million, forecast 17.338 million, and previous 18.06 million. 

The improvement in the continuing jobless claims data means that Americans may not get as generous stimulus checks, if any. The critical element is that both the initial and continuing jobless claims number do not support the argument that businesses are hiring workers at a pace that could bring unemployment down to its previous level anytime soon. This keeps the hopes alive for stimulus checks. 

Basically, US consumers do not have the same confidence that they had pre-Covid-19. They need help, and this help—for the time being—could be through an appropriate stimulus package. The possibility of them getting back in the job market isn’t that great, and the current job protection measures-which sent stimulus checks to Americans-are about to expire at the end of this month is making them more nervous.  

Stimulus Background 

The next stimulus draft is expected to be in front of Congress next week by Senate Majority Leader Mitch McConnell. The new stimulus package is likely to include demands from both Republicans and Democrats. Also, the new stimulus proposal will also need bipartisan support. So far, Donald Trump has thrown his support for a new stimulus proposal. 

 Stimulus Rumors 

There are also rumors that the next stimulus proposal, which is likely to have stimulus checks for Americans, isn’t going to be the last one for this year. It is likely that we may see another stimulus package near the US elections. Such a stimulus package could have a detrimental impact on the outcome of the US elections. 

 Some form of stimulus check or direct payment is likely in the upcoming stimulus bill. The eligibility criteria, how many people will qualify for a second stimulus check, and how big the second stimulus check are the questions that have been going around since the first round of stimulus checks. 

Bottom Line 

 The fate of more stimulus checks and what will be included in the stimulus proposal will be decided in the coming weeks. By looking at economic data and how the US economy is stalling, it seems that Americans and US corporates are likely to get more help in the next stimulus bill.