2020 will be the year that changed how we look at the US economy forever.
With unprecedented benefit packages and relief programs from COVID-19, the economic shakeup has been asking people what type of impact this will have long-term, let alone the next six months. Considering that we’re in an election season, both sides are going to want to win over their base while working with the benefits people have been happy to receive.
When factoring everything else in our polarizing year, we’ve decided to put together a list of five considerations we could anticipate for the second half of 2020. Here’s what you should know:
A Stall In Benefits
While programs like PUA and PPP have been great in keeping people afloat, most benefits run out in late-July. With no current plan in place by Congress to replace or extend these programs, we could see a stall in benefits, or quite possibly no more financial relief at all. Considering that this is an election year, both sides are going to exacerbate what they believe their base wants, however, it’s to be determined just how the public reaction will be when the second batch of relief packages hit the congressional floor.
On the left, moderate and progressive Democrats have been proposing everything from a $2,000 per month UBI to extending the current plan into the Fall. On the right, Republicans’ biggest fear is that people are unwilling to go back to work since they’re making more off of unemployment than their actual jobs. To combat this trend, they’re proposing changes such as ‘back to work’ bonuses. Ultimately, both sides will have to come to some sort of agreement to make their constituents happy, which might boil down to raising the minimum wage.
Unemployment Staying Stagnant
With ongoing debates and the added potential of unemployment benefits extending without any incentive to go back to work, a lot of employment opportunities might simply be left on the table. Of course, this could crash a lot of companies that have relied on maintaining and growing from cheap labor; and those who can hire might be forced to go with less experienced talent if they can’t increase their pay grade. The numerous factors at play between the value of wages versus unemployment could leave employment in flux for the next few months, especially if there isn’t much incentive for a lot of the workforce to go back (including those who had positions that are now rendered obsolete).
Ultimately, it’ll take a few months to ‘normalize’ spending habits to truly the impact of how people are genuinely behaving with their money.
Spending to Start Slowing
Even with an extension of benefits, spending could possibly drop significantly as well. After all, with the uncertainty of employment opportunities, the looming fear of a second Coronavirus wave in the fall, and the elections possibly dictating a fiscal conservative or liberal policy for 2021, people could start stowing cash. Of course, we’ve touched on how in this case, the Federal Reserve might implement negative interest rates, however, borrowing and spending are still at a healthy level from the federal benefits. Ultimately, it’ll take a few months to ‘normalize’ spending habits to truly the impact of how people are genuinely behaving with their money.
Banks Competing for Lower Rates
One positive for consumers is that with a fear of saving and hoarding comes better interest rates. Although banks are already at a pretty competitive level regarding rates, don’t be surprised if they continue to dip. Additionally, if you currently have a personal loan, credit card, or mortgage that’s a little steep, it might not be a bad idea to start exploring for a new price regardless, as the savings can be tremendous. For credit, it’s becoming a buyers market, with banks hoping to continue this push of lending and spending as much as possible.
How The Election Will Play An Impact
Finally, the congressional and presidential elections of 2020 will play a role in everything. This includes the stock market, COVID-19 recovery, how we define unemployment/joblessness, different approaches to community/federal services, and even if we’ll have long-term solutions like UBI being a permanent law. Although we touched on earlier about electorates trying to woo constituents, don’t be surprised if you see them step out of their normal policies to impress their base. This year has been an absolute whirlwind so far, and with a lot of it culminating in this election season…expect things to finally have a resolution soon.
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