COVID-19

Will the relief package boost consumer spending in 2021?

Marielle Segarra Dec 31, 2020
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Women carry shopping bags while walking in Georgetown on Dec. 23, 2020, in Washington, D.C. Alex Edelman/AFP via Getty Images
COVID-19

Will the relief package boost consumer spending in 2021?

Marielle Segarra Dec 31, 2020
Heard on:
Women carry shopping bags while walking in Georgetown on Dec. 23, 2020, in Washington, D.C. Alex Edelman/AFP via Getty Images
HTML EMBED:
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Consumer spending accounts for nearly 70% of U.S. economic activity. And over the past couple months, spending has been trending down. The hope is that the relief package just passed by Congress will reverse that downward slope in the new year. Is that likely?

Well, when Congress passed the first relief bill in March, it worked … eventually.  

“The passage of the CARES Act drove an increase in consumer confidence, and that, in turn, translated into an increase in consumer spending,” said John Leer, an economist at Morning Consult. “But it took a few weeks for that effect to play out.”

It takes time for the checks to hit people’s bank accounts, for states to distribute the unemployment benefits and for people to spend the money.

Leer expects the same this time around.

Also the government is giving people half as much money this time, so he expects any bump in consumer spending to be smaller.

Keep in mind: This moment is still looking bleak. The virus is more widespread than it was in the spring. The vaccine rollout is taking longer than expected.

“I think that all of those things together are going to make everyone, make consumers more wary about going out and spending their $600 paychecks right away,” said Sonia Lapinsky, managing director at Alix Partners.

The relief package will help a lot of families that have lost jobs this year, but ultimately, this money is a bridge until the virus is under control, said Gregory Daco, chief U.S. economist at Oxford Economics.

“What you need to see in order to have a strong and sustainable economic recovery is a strong and sustainable health recovery,” Daco said. “And that will only come gradually over the next few months.”

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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