By Jill Schlesinger
On November 8, U.S. news outlets called the 2020 election, but investors had already voted with their money. After the worst week since March, stocks soared election week and recouped all of the previous week's losses–and then some. The S&P 500 soared 7.3% the best presidential election week since the 1932 election.
Wall Street interpreted a Joe Biden presidency, a Republican-controlled Senate and a Democratic House as a win for corporate America, because with divided government, the thinking goes, it is unlikely that there are going to be enough votes to enact a tax increase on corporations or on the top 2% of individuals. Any potential increase in regulation for the energy, financial services, or health care sectors could be outweighed by a reversal of the trade war with China.
While gridlock might be good for stock investors, what about the overall economy? On that front, the news is mixed. As Federal Reserve Chair Jerome Powell noted two days after the election, “the path of the economy will depend significantly on the course of the virus,” and the recent rise in cases “is particularly concerning.” Most analysts agree that the first round of stimulus helped the economy recover to where it is today, which is why the next round is desperately needed to get through the winter months.
Fresh off his election win, Senate Majority Leader Mitch McConnell said Congress should focus its energy on approving a new coronavirus stimulus bill “by the end of the year” and it would possibly “do more for state and local governments.” That would be a relief, because without any more money, 5.3 million workers could lose their jobs by the end of 2021 if municipalities don't get a bailout, according to the Economic Policy Institute.
Meanwhile, the October employment report was a good one. The economy added 638,000 jobs and the unemployment rate dropped a full percentage point to 6.9 %, as more people entered the labor force and got jobs. With the sixth consecutive month of gains, the labor market has recouped about 12 million of the 22 million jobs lost due to the pandemic. But there are still problems, including:
– The pace of job growth is slowing down.
– There are still 10.1 million fewer jobs than in February. The losses are still 15% worse than those experienced in 2008-09.
– As the number of COVID-19 cases rise, there could be limits to the number of jobs added this winter, especially in leisure and hospitality. Nine percent of businesses planned to lay off workers during Q4 due to the outbreak, according to a Conference Board survey last month.
– Long term unemployment (out of work for more than 27 weeks) jumped by 1.2 million to 3.6 million, representing about a third of those unemployed. These workers “tend to get lower paying jobs once they are reemployed and suffer more mental and physical health problems than those who are only unemployed for a short period of time,” says Grant Thornton Chief Economist Diane Swonk.
– The number of people who are working part-term instead of full-time for economic reasons jumped by 383,000 to 6.7 million.
Hopefully, lawmakers will see the danger that lurks. In addition to the $600 per week extra benefit, which expired at the end of July, here are the CARES Act provisions that are slated to expire at the end of 2020:
– Enhanced unemployment benefits (self-employed/gig workers)
– Extended unemployment insurance benefits (26 to 39 weeks)
– Eviction ban
– Mortgage relief and forbearance on federally insured home loans
– Student loan forbearance on federal loans
– Expanded 401 (k) Hardship loans and withdrawalshealthcare.gov/coronavirus.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
