WASHINGTON: Increased transfer payments and expanded liquidity measures aimed at companies should help buffer U.S. households and businesses from the worst of the economic crisis unleashed by the coronavirus pandemic in coming months, the White House Council of Economic Advisers said in a report on Thursday.
Nonetheless, the economy would recover faster and with less scarring if agreement were reached on additional support, Tyler Goodspeed, the CEA's acting chair, told reporters in a briefing on the report.
Republicans and Democrats in Congress are at an impasse over the size of another coronavirus aid package, with talks having broken down in the past week.
"Very substantial headwinds remain," Goodspeed said. "What is going to be absolutely essential for continued economic recovery is ... a continued recovery in the U.S. labor market."
The report said the U.S. government acted with "unprecedented scale, speed, and coordination, surpassing past efforts to mitigate previous crises," and said it had helped ameliorate a stark economic contraction while improving expectations for a recovery in 2021.
However it cautioned that its findings were based on data through mid-July, and the longer-term impact was still evolving.
Federal Reserve officials warned https://www.reuters.com/article/us-usa-fed/fed-policymakers-say-economic-growth-will-be-muted-until-virus-contained-idUSKCN2581UU this week that the U.S. economic recovery will be slow until the virus is under control, and the expiration of economic stimulus could slow the recovery further. At least 5.2 million coronavirus cases have been reported https://graphics.reuters.com/HEALTH-CORONAVIRUS-USA/0100B5K8423/index.html in the country and more than 166,000 people have died.
"It does appear as of now that the increase in transfer payments resulting in a marked increase in personal income and savings, and the expanded liquidity measures aimed at firms, will likely provide a buffer to households and businesses for the next few months, allowing them to weather the worst of the crisis," the report said.
The U.S. government's Paycheck Protection Program, which provided loans that could be converted to grants if small and medium-sized businesses met certain conditions, had helped stabilize labor markets, the report said, with an estimated 80.6per cent of layoffs likely to be temporary rather than permanent.
Small-business bankruptcies dropped 1.8per cent in the April-June period, compared to a year earlier, instead of soaring nearly 155per cent as predicted.
The report said low-income households, in particular, benefited from expanded unemployment insurance and economic recovery rebates, with disposable income increasing 5.4per cent, starting in February.
In the retail sector, which lost 1.3 million jobs from February to June, for instance, nearly 83per cent of workers could receive more from unemployment than from working, it said.
An expected deterioration in consumer debt and credit indicators had not occurred, but the situation could still change quickly, the report said.
It noted that severe delinquency rates had stayed low or even fallen across all types of debt, possibly due to accommodations, particularly for student loans.
Bank card balances also fell, with lenders keeping credit limits constant instead of cutting them as happened during the Great Recession.
(Reporting by Andrea Shalal; Editing by Paul Simao)