I’d argue the last thing we needed today was good news.
In case you’re been hiding under a rock, you know that the economy unexpectedly added 2.5 million jobs in May and the unemployment rate fell to 13.3%. (Read my immediately prior post for a run down of why these numbers are too good to be true.)
And that markets rallied with the Standard & Poor’s 500 climbing 2.62% and the NASDAQ climbing to near a new record high.
But I wish this hadn’t happened today.
Because the jobs numbers and the stock market rally–we’re now down only 6% from the S&P 500s February high–mean that its now really really unlikely Congress take any of the actions we need to make sure any economic recovery is sustained and not simply a blip in the pan.
Before today’s good news, Mitch McConnell and the Republican-controlled Senate had been saying that they didn’t want to pass another coronavirus rescue package until they saw how the last few had worked. No renewal of the enhanced unemployment benefits, no second cash payment to individuals, no funding for states and cities that had seen tax revenues plunge.
The White House had been showing signs that it would like another package ahead of the November elections. Maybe as much as another $1 trillion. And McConnell had said that maybe $1 trillion might be possible. (The House has already passed a $3 trillion package.)
The case for delay is, I’m sure, even stronger in the Senate and I’d expect the White House will push less forcefully for a coronavirus package.
Already McConnell’s schedule promised no action before July 20.
And that means that the trickle of layoffs at state and city governments will become a torrent. It’s hard to generate a sustained economic recovery when the government sector is laying off hundreds of thousands of workers.
The good news also makes it less likely that the Federal Reserve will pull more stimulus out of its hat. The central bank is already near the point where all new initiatives will require a trip into unexplored territory. The Fed sounded like it was willing to go where few central banks have gone before when it felt it was confronting a real emergency. Now? I think the Fed will be happy to sit back, like the Senate, and wait to see what happens.
Finally, on the coronavirus front, I think today’s positive surprise will make it tempting to believe that we can have our cake and eat it too. If you want to read the data this way, today’s number say that the economic re-opening is working and that the predicted second wave of infections isn’t going to be as severe as predicted. So, once again, the temptation after today will be to sit back and wait to see what happens.