Immediately after the $600-a-week jobless benefit boost expired last month, consumer spending took a hit, according to real-time analysis by researchers at Harvard University, suggesting that the benefit played a major role in buoying households.
Since the virus hit the United States, incomes have remained strong in part because of the federal government’s response to the disease, which included the $600 weekly payment. Consumer spending hit an all-time high last month.
That $600 payment, however, expired in July.
States stopped issuing the payment after July 25. Immediately following that date, consumer spending overall declined, according to Harvard’s Opportunity Insights Economic Tracker, which uses real-time analysis of data such as consumer spending and job postings aggregated by private companies and shared with the researchers.
It showed that consumer spending began to slide on July 26 after increasing for six consecutive days. It has yet to recover.
On July 26, spending was off 6.1% compared to January. That figure increased to 8% by Aug. 2, the latest date reported.
Industries vulnerable to discretionary spending, such as the apparel and general merchandise sectors, saw a larger drop in spending of 3.4% over this time period.
Harvard’s tracker does not blame decreased spending on the $600 bonus payment ending, but recent polling indicated that losing the benefit likely played a pivotal role in recent spending declines.
Nearly 60% of unemployed respondents receiving the $600 payment said they would struggle to make ends meet on its expiration, according to a poll from CouponLawn, an online coupon service. The survey polled the opinions of over 1,000 unemployed people and was conducted by MTurk, a service owned and operated by Amazon.
The poll also found that over half of the respondents, 50.4%, would not be able to pay their rent or the mortgage without the payment. In addition, 48% would not be able to afford groceries and household supplies.
“The expiration will decrease the purchasing power of the economy, since these unemployed Americans have been spending their allowances in both basic necessities and needs,” the poll states.
Voters in battleground states blame Democrats and Republicans for failing to extend the $600 enhanced unemployment payment, according to a Change Research/CNBC poll.
The blame was essentially split evenly between President Trump and Republicans in Congress (39%) and Democrats in Congress (40%), while 18% blamed the parties equally.
Lawmakers in both parties, including Trump, support extending the enhanced benefit, but they have so far failed to agree on a dollar amount for the payment.
Trump signed an executive order on Aug. 8 providing a $400 bonus payment to unemployed workers. However, that would be $200 less than what the previous benefits provided before expiring in July.
House Democrats passed legislation that would extend the $600 payment until Jan. 31 for most jobless workers.
Meanwhile, Senate Republicans included a $200 additional unemployment payment in the HEALS Act that Majority Leader Mitch McConnell, a Republican from Kentucky, released in July.
Democrats and Republicans, including White House officials, failed to reach an agreement in early August on a federal relief package that likely would have extended the enhanced unemployment payment at some level.
