The number of new applications for unemployment benefits rose last week to the highest level since late August, as persistent layoffs are holding back the economic recovery, the Wall Street Journal reported. Claims increased to 898,000 last week, holding above the pre-pandemic high point of 695,000, according to today’s Labor Department report. After steadily declining from a peak of near 7 million in March, claims have clocked in between 800,000 and 900,000 for more than a month as companies readjust their head counts. The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased to about 10 million in the week ended Oct. 3 from 11.2 million the prior week, according to the Labor Department. So-called continuing claims declined throughout the summer, indicating employers have continued to hire workers. Still, some of the recent declines in continuing claims represent individuals who have exhausted the maximum duration of payments available through regular state programs and are now collecting money through a federal program that provides an extra 13 weeks of benefits. About 2.8 million people were receiving aid through this extended-benefits program in the week ended Sept. 26, representing the largest number since the program began this spring, Labor Department data shows. An increasing number of individuals relying on extended benefits suggests that many Americans are experiencing long spells of unemployment. The extended-benefits program is set to expire at the end of this year, however. (Subscription required.)
Trump Says He's Willing to Raise Stimulus Offer to over $1.8 Trillion
President Trump said today that he is willing to go higher than his current $1.8 trillion offer for the next coronavirus stimulus package as the White House continues negotiations with Democrats, The Hill reported. “Absolutely, I would. I would pay more. I would go higher. Go big or go home,” Trump said during a phone interview on Fox Business today. Trump, who did not specify a dollar amount, said that he had directed Treasury Secretary Steven Mnuchin to offer a larger figure to House Speaker Nancy Pelosi (D-Calif.) but said “so far he hasn’t come home with the bacon.” Trump also said that he was not willing to agree to Pelosi’s own $2.2 trillion offer, claiming as he has repeatedly said that the top Democrat is seeking “bailouts” for cities run by Democrats that are cash-strapped for reasons unrelated to the coronavirus pandemic. The president insisted that Republicans are on board for a larger stimulus package, despite objections among GOP senators to the $1.8 trillion offer that Mnuchin proposed to Pelosi last week. Trump also claimed that the U.S. would force China to pay for the additional stimulus, without providing an explanation of how he would do so, as he blamed Beijing for the coronavirus pandemic.
Lower-Income Workers Face Tax Burden Equal to 70 Percent When Adjusted for Loss of Gov. Benefits, According to Fed Researchers
Federal Reserve Bank of Atlanta researchers say that millions of low-income Americans are locked into poverty thanks to U.S. tax policy, Bloomberg News reported. About a quarter of lower-income workers effectively face marginal tax rates of more than 70 percent when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found. That means for every $1,000 gained in income, $700 goes to the government in taxes or reduced spending. In some cases, there are no gains at all. Poorer families may rely on Medicaid insurance, welfare payments, food stamps, housing vouchers and tax credits that are based on family incomes. Small increases in wages can bring big losses of benefits, reinforcing a negative cycle in which workers aren’t rewarded if they improve their skills or pay. “This is a perverse incentive that says you shouldn’t try to make yourself better,” said Atlanta Fed President Raphael Bostic. "It’s on us to actually change those incentives so that people understand what the potential is and move forward towards opportunity.” According to the U.S. Census Bureau, 34 million Americans lived below the poverty line last year. The Atlanta Fed has developed online tools it calls “dashboards” that allow career centers across the U.S. to advise workers on how to increase their pay in ways that minimize or compensate for the loss of benefits. Career advisers can enter specific details — for example, a mother with three kids along with their various government programs — and suggest ways to make lasting pay gains. The bank is in serious discussions with local partners in states throughout the Southeast, as well as New York, Connecticut, Colorado, Oklahoma and Wisconsin — sometimes in conjunction with the Richmond Fed and Kansas City Fed.
Fed Vice Chair: U.S. Economy Will Take Years to Fully Recover from Coronavirus
Federal Reserve Board Vice Chairman Richard Clarida said yesterday that it could take the U.S. economy years to fully recover from the coronavirus pandemic and would likely require further fiscal support from President Trump and Congress to make it out of the woods, The Hill reported. Clarida said that it would likely take another year for the country's gross domestic product (GDP) to recover to its peak in 2019 and even longer for the unemployment rate to fall back down to its pre-pandemic level of 3.5 percent. “While economic recovery since the spring collapse has been robust, let us not forget that full economic recovery from the COVID-19 recession has a long way to go,” Clarida said. “It will take some time to return to the levels of economic activity and employment that prevailed at the business cycle peak in February, and additional support from monetary — and likely fiscal — policy will be needed.”
Auto Debt Complaints Have Been Soaring During Pandemic
Consumers struggling to keep up with their auto debts filed a record number of complaints with a key federal consumer watchdog agency in the first five months of the pandemic, according to a new analysis of government data released yesterday, MarketWatch.com reported. The report found that the Consumer Financial Protection Bureau (CFPB) received 2,844 complaints by borrowers, or pleas for help, on auto-related disputes from March to July, the highest of any five-month period since the CFPB started collecting consumer complaints in 2012. The complaints showed that borrowers have been hard-hit by COVID-19 after a booming decade for auto financing, but also pointed to a potentially bigger crisis brewing in the months since auto debt relief was left out of the $2 trillion CARES Act, passed by Congress in March. “In the first months of the pandemic, many auto lenders … offered relief programs to their customers. But without federal requirements for relief programs, those programs have been inconsistent,” wrote the report’s co-authors, a team from the U.S. PIRG Education Fund and its research affiliate Frontier Group. What’s more, auto debt complaints were piling up even as many households received one-time $1,200 stimulus checks and before $600 a week in additional unemployment benefits expired at the end of July. While the report said that earlier relief efforts “prevented or at least delayed a massive wave of automobile delinquencies and repossessions,” it also warned that “strains caused by COVID-19 threaten to turn a situation that is already damaging to many consumers into a full-blown crisis.” Click here to read the full report.
Additionally, Prof. Pamela Foohey recently released a paper arguing that power imbalances between auto lenders and consumers have widened and likely will continue to widen, to consumers’ detriment. Click here to access her paper.
ABI Sessions Coming Up at the Insolvency 2020 Virtual Summit: What the Outcome of the Presidential and Senate Races Might Mean for the Economy, Mass Tort Claims, Municipal Insolvency, ABI Talks and More!
Tomorrow!
• Getzler Henrich Roundtable
• “What Happens After the Election? What the Outcome of the Presidential and Senate Races Might Mean for the Economy, Key Industries and Municipalities,” sponsored by Squire Patton Boggs and featuring former Speaker of the U.S. House of Representatives John Boehner, former Congressman and Chairman of the Democratic Caucus Joseph Crowley, former Congressman Bill Shuster and former Secretary of Transportation Rodney Slater.
Oct. 19
• Trends in Restaurant Restructuring, sponsored by Grant Thornton • Who Went Broke? Trivia Game • Virtual Soirée, with Guests Chef Gio Osso, Brian Day O’Connor, Comedian Bob Howard
Oct. 20 • Tuesday Training Demo: How to Leverage Digital Marketing for Your Practice in a Virtual World, sponsored by Glantz Design
• Networking Event: All About Cheese (and Wine…)
Oct. 22-23 • Views from the Bench: Mass Torts, ABI Talks, plus 9 other sessions
• Networking Hour sponsored by Solutions Health Care Management
Don’t miss great programming from Summit partners NCBJ, American College of Bankruptcy, CLLA, ABC, NYIC and ABA throughout the week!
Sixteen leading insolvency organizations are participating in the Virtual Summit through Oct. 27 to bring thought leaders from the worlds of restructuring, insolvency and distressed debt for insightful online programming and engaging networking via a state-of-the-art virtual platform. Click below to learn more about how the Insolvency 2020 platform provides attendees with an enhanced online conference experience:
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New on ABI’s Bankruptcy Blog Exchange: USAA's Regulatory Troubles Now Include OCC Fine, CRA Downgrade
The $85 million penalty and the bank’s “needs to improve” rating on its Community Reinvestment Act exam were tied to alleged violations of the Military Lending Act and Servicemembers Civil Relief Act, according to a recent blog post.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
