First 100: Both Good and Bad Economic Indicators Point to the Biden Rescue Plan

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Retail sales figures jumped last month but Walmart predicts a slower year ahead.

It’s February 18, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.

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The Chief

Retail sales numbers surged in January, as people spent their $600 stimulus checks. You can tell a story about a solid economy waiting to break out once the all-clear signal lifts and a semblance of post-pandemic normalcy sets in. And yet you can also tell a story about a locked-down economy—made temporarily worse by Arctic cold—that is leaving people behind.

First-time jobless numbers have been above the worst level of the Great Recession every week since the pandemic started. That’s going on nearly a year. Last week the number was supposed to slip to a still-above-the-Great-Recession 770,000. Instead it rose to 861,000, the Labor Department announced today, and the previous week was revised up sharply.

How can these numbers tell the same story? You can bring in a third set of numbers to reconcile them: the falling COVID cases and hospitalizations. A number of factors explain that, from vaccinations to natural immunity in key populations to the more seasonal nature of coronaviruses. But one big one is social distancing: mobility data shows that people actually got the message after Christmas and began to stay home.

So if more people are at home, then restaurants and retail stores don’t need as much staff. And the pink slips go out. People have purchasing power, however, from the $600 check and the extra $300 in weekly unemployment compensation, and more subtly from the lack of leisure and entertainment options accumulated over the course of a year. So there’s money to burn on deliveries and groceries and other goods. That’s how you can have a consumer spending surge and a job collapse.

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Both sets of data reveal the need for the American Rescue Plan, actually. The reason for the spending increase in January, which will eventually funnel out into more economic activity, was the stimulus from those direct payments. And with more heading onto the unemployment rolls every day—16 million on regular unemployment, Pandemic Unemployment Assistance for freelancers and gig workers, and the extended benefits of Pandemic Emergency Unemployment Compensation—we need to keep the latter two programs going before they expire in less than a month, as well as keeping the federal enhancement in place.

But there’s even more to it. Walmart released a forecast predicting disappointing sales in the next fiscal year. The theory is that people made their big-ticket purchases with stimulus money and have no need to upgrade. More important, the political system is reckoning with changing habits leading to permanent job loss, with no need for millions to return to work. More work from home and less business travel is a seismic economic event. The shops and lunch joints clustered in business districts may not be needed at the same capacity. All of the hospitality and travel services can be scaled down, as catering to business travelers is a big chunk of the income.

You don’t have to fear automation and robot takeovers of jobs (it’s a good thing if it increases productivity, actually) to worry about a sort of substitute automation, where technology indirectly obliterates jobs through remote work. How will the economy recover? Well a big stimulus package could provide a bridge to that other side, with public investment paying off in higher-wage jobs, not to mention the long-term benefits. And we know there’s a lot that needs fixing in our nation.

Yet many will engage in a one-sided reading of the data and decide that a month-long consumer spending boost means that the economy needs no further support. Or they will just plug a set of data into pre-existing priors. That’s what we see with the Committee for a Responsible Federal Budget’s press release demanding a perfectly targeted, perfectly precise rescue package where non-disaster items are “paid for.” There’s the usual talk about state and local governments being fine (despite dramatically higher layoffs) and overshooting the output gap (which is a slippery concept that varies wildly) and “targeting” relief (when we don’t have the income data).

But CRFB is also mad about a long-sought fix to save the pension benefits of hundreds of thousands of workers, because they don’t consider it “COVID relief.” Benefits would get cut 65 percent without a solution, an unconscionable outcome at this time. The Ways and Means Committee apparently rolled back the unemployment benefit extension from September to August to make room for this fix, but the problem isn’t the fix, it’s rolling back the UI extension for no good reason.

I think Democrats are likely to brush off the overall concern, although rolling back a month of unemployment benefits suggests that they’ve already drawn blood. That needs to be changed, and the pro-austerity, “we’ve done enough” forces need to be combated.

What Day of Biden’s Presidency Is It?

Day 30. Cue the “One Month Agenda” takes.

By the way, we’ve been updating our Executive Action Tracker to reflect Biden executive actions. With his rejection of student loan cancellation at Tuesday’s Milwaukee town hall, we have made that an official “NO.” That’s subject to change, however, as the president will reportedly ask the Justice Department for a review of the legal authority to cancel student debt. The Office of Legal Counsel routinely advises presidents on legal reviews. Biden hasn’t named anyone to run that office, and there’s no timeline for the review.

Check out the Executive Action Tracker here.

Today I Learned

• Useful rundown of what’s in the House rescue bill. (Vox)
• Lawmakers are already looking ahead to the second reconciliation bill, and trying to determine its contours. (Washington Post)
• Some troubling pre-compromising on an immigration package that was already going to be tough to pass. (New York Times)
• Biden allies mount an outside advocacy group. (Wall Street Journal)
• Joe Manchin setting a marker that whatever the Senate parliamentarian decides will set the reconciliation boundaries. (CNN)
• The IRS is drastically underfunded. (Politico)
• 74 members of Congress ask Biden for an immediate filling of vacancies on the Postal Service Board of Governors, so they can dispatch Louis DeJoy. (House letter)
• The “Rahm Emanuel might get a job” talk will never end. (Bloomberg)
• How FERC can play a role in climate mitigation. (Grist)