COVID-19 Briefing Memo

August 26, 2021

Executive Summary

Heading into September, the economy continues to chug along, though next month serves as a critical juncture point for many Americans – as several significant pandemic-related assistance programs are all scheduled to expire. But, for now, the labor market remains relatively strong. According to The Wall Street Journal, “The number of workers applying for and receiving unemployment benefits has reached pandemic lows over the past month, a sign the job-market recovery remains on sound footing despite uncertainty surrounding the Delta variant of COVID-19. Unemployment claims edged up to 353,000 last week from a revised 349,000 a week earlier, the Labor Department said Thursday. The four-week moving average, which smooths out volatility in the weekly figures, fell to 366,500 last week, a new pandemic low.” According to the chief economist at PNC Financial Services Group, “Even with the spread of the Delta variant, many people who are vaccinated feel more comfortable doing things than they did previously. Demand for labor remains very strong.” However, new data suggests that the country’s economic expansion slowed in August, as “U.S. factories and service providers reported sharply slower growth in August,” according to The Wall Street Journal. Based on data from HIS Market, “its index of service-sector activity, the broadest segment of the economy, fell to 55.2 in August from 59.9 in July, hitting an eight- month low. An index of factory activity dropped to 61.2, a four-month low, from 63.4 in July. … But the surveys show that the Delta variant of the COVID-19 virus, which has led to a new wave of infections and hospitalizations and has spooked consumers, is harming the economy.” IHS’ chief business economist noted “the [economic] expansion slowed sharply again in August as the spread of the Delta variant led to a weakening of demand growth, especially for consumer-facing services, and further frustrated firms’ efforts to meet existing sales.”

And this type of data will be important to monitor over the next few months, as September marks the end of several pandemic-era safety net programs, like enhanced unemployment benefits, financial support to self-employed and gig economy workers, and a program offering additional weeks of unemployment benefits. In taking note of the significance of next month, Bloomberg today wrote that “All spring long, [September] was heralded as a symbolic turning point for the U.S. economy. … But the month that originally seemed like a logical time to ease fiscal support is here, and it’s not proving to be the inflection point for normalcy that policymakers and business leaders had imagined. The delta variant of the coronavirus is ripping across a country with far lower vaccination rates than Congress had been modeling when it wrote the latest relief bill.” According to one former federal reserve economist, “If you could do the world where delta never showed up, then September wouldn’t have been so bad for a lot of the fiscal relief to start expiring. [Now though], there’s a lot of relief that shouldn’t be expiring.” So, while the Delta variant “may start to slow its spread, based on what transpired in the U.K.,” according to Moody’s Analytics’ chief economist, “if we get into September and infections and hospitalizations are still increasing, then I think forecasts are going to start to change at that point and financial markets are going to react.” As was noted before, September is truly shaping up to be a critical month when it comes to testing the long-term strength of our current economic recovery.
The Delta variant isn’t just continuing to impact the economy; it’s also still making waves when it comes to travel. According to this week’s research from Destination Analysts, “Even with high vaccination rates among travelers, the Delta variant situation is casting
a heavy shadow,” as “about 60% of American travelers say what’s happening with the Delta variant is making them less interested
in travel right now (up from 54.3% the week of Aug. 9).” At the same time, “an increasing number of travelers are saying they have postponed an upcoming trip specifically due to the Delta variant (32.7% up from 27% two weeks ago); those who say they have canceled a trip due to Delta variant concerns remains at 27.5%.” With all that being said, “80% of American travelers still have trip plans,” with “24.4% report having travel planned in September, and 23.4% report having travel planned in October. Both November and December are currently above 20%, as well.” So even though the Delta variant is raising concerns, it seems many are still planning traveling, though some may be considering delaying until circumstances improve.
As we round the corner into September – a month that many originally thought would be a symbolic endpoint of the pandemic – it’s clear the virus had other plans. And so, while pandemic relief programs have help propped up and stabilize the broader U.S. economy for a while now, their expiration will come with trepidation from many, as no one knows for sure just what kind of impact it will have on our recovery – yet.

 

Coronavirus Aid, Relief and Economic Security (CARES) Act

April 10, 2020

Congress has completed its work on the CARES Act, also known as “Phase 3” of the COVID-19 federal response. We now shift our updates to the regulatory and implementation side with a focus on helping our clients and partners navigate the options for federal assistance during the pandemic and beyond.