InRealTerms is a weekly newsletter published every Monday morning, bringing major current events from the past week right to your inbox in a concise summary.
Past Newsletter:
Volume 15, Edition 1, October 12, 2020
US Economy
Here is your roundup of recent news in economics
Unemployment Remains at Historic Highs
JENNIFER HUANG
After eight months of economic recession, US unemployment rates remain at historic highs. The Department of Labor reports that the number of new unemployment claims this week decreased to 840,000. While unemployment claims are down 9,000 from last week, the weekly decrease in claims is starting to plateau, which is a worrying sign for economic recovery. The Department of Labor also announced that the current unemployment rate is 7.9% overall, 12.1% for black Americans, and 10.3% for Latinos. Unemployment continues to disproportionately affect people of color and low-income workers.
Read More: Washington Post • Department of Labor • The GuardianUS Budget Gap Triples Amidst Pandemic
GARRETT EMMONS
The US budget gap grew to $3.1 trillion this fiscal year from $984 billion last year. This deficit equals just over 15% of the GDP, which is the largest percentage since World War II. Easily the highest budget deficit in US history, it more than doubled the previous record of $1.4 trillion set in the first year of the Obama administration in response to the Great Recession. A combination of pandemic relief spending and pandemic-induced decreases in federal revenue contributed to the ballooning deficit.
Read More: WSJ • AP • Financial World • MarketWatchFederal Reserve Bond Purchasing Boosts Economy and Bank Revenues
JORDINE WILLIAMS
To stabilize financial markets during the pandemic, the Federal Reserve has bought around $3 trillion in Treasuries and mortgage-backed securities since March. Consequently, banks’ revenues from trading MBSs are expected to exceed $3 billion this year. The Fed has also committed to spending at least $120 billion a month on these assets since June. Minutes of the Fed’s September 15-16 meeting even indicate that they may soon discuss an increase of spending on such assets. However, many Wall Street firms expect the Fed to reduce bond-buying in 2021 and stop completely by the second half of 2023.
Read More: Reuters • Bloomberg • ReutersGlobal Economy
Slowing of UK Economic Growth
ADAM WANG
Monthly data released by the Office for National Statistics show slowing economic growth in the UK. Compared to the 4.6% consensus forecast by economists, national GDP rose just 2.1% in August. The majority of the growth was composed of a 70% expansion in the food and beverage sector and a 76% expansion in the accommodation sector (FT). The disappointing data have raised concerns about the government’s fiscal and monetary policy.
Read More: CNBC• FT• MW• ReutersPolitics
Trump’s Fluctuating Stimulus Package Decision
MIA GLASS
Just days after halting negotiations on a new stimulus bill in a tweet, Trump changed his mind. Following backlash, dips in the stock market, and contrasting views with Jerome Powell, Trump realized that his original decision could cause his favorability to decline. The White House quickly changed course and proposed $1.8 trillion to Speaker Nancy Pelosi, while also looking at individual relief bills specifically for the airline industry. However, even if Treasury Secretary Mnuchin and Pelosi reach a deal, it is unlikely that the bill will advance through the GOP-controlled Senate and become law.
Read More: NYT • Wall Street Journal • Washington Post • PoliticoJerome Powell’s Remarks on The Economic Recovery
MATTHEW PALMER
Jerome Powell delivered a speech concerning the current economic recovery and the effectiveness of the economic response to the pandemic-induced recession. His overall assessment of the recovery was optimistic, characterizing it as “strong but incomplete”, but he also emphasized the need for more government intervention to continue rebuilding the economy. Powell stated that not doing so could cause the economy to lose all of its progress and create “unnecessary hardship for households and businesses”. The risk of “overdoing it”, Powell said, is very minimal, at least for the time being.
Read More: The Federal Reserve • WSJ• Washington Post • BloombergChief Editors:
Jason Katz
Louise Tang
Editors:
Sadman C.
Ariya Roberts
Alessandro Marchesani
Questions?
Contact us at ces@cornell.edu
Previous Newsletters: