How Americans are likely to spend the second round of relief checks
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Long-awaited fiscal relief is in sight for many Americans, but the suspense continues.
Senate Majority Leader Mitch McConnell blocked an effort by Democrats Tuesday to raise the amount of the next round of relief checks to $2,000. That leaves the amount, for now, at $600 per person and $1,200 per couple.
Something is better than nothing for folks who’ve been out of work for a while. So how we can expect this round of relief payments to move through the economy compared to the last time?
In the spring, as the pandemic spread and the economy was shut down to stop it, relief checks went out: $1,200 for an individual and $2,400 for a couple. Constantine Yannelis, an economist at University of Chicago, said within the first three months, most of the money stayed in the bank.
“People spent about a third of their checks,” he said, for two reasons.
First, those who still had their jobs and income didn’t need the money to pay their bills. And with pandemic shutdowns, it was hard to shop and travel the money away.
Meanwhile, Americans who had lost jobs and income tried to stash away whatever relief money they could.
“People had expectations that the crisis would be very long, and their income might be disrupted for a long period of time,” Yannelis said.
This time around, Yannelis thinks that even with vaccination underway, there’s still so much economic uncertainty that most people will try to save some of the money again.
But that may be harder with this second round of checks. Nine months into the pandemic, millions of Americans are still out of work and unemployment benefits are dwindling.
“Lower- and middle-income Americans who really have very little savings have gradually had to eat into their savings, because they don’t have the income to cover their expenses each month,” said John Leer, an economist at Morning Consult.
They’re likely to spend their checks right away on necessities: food, rent, utility bills and car payments.
COVID-19 Economy FAQs
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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