Archives for December 2020

Many business groups counter that increasing the minimum wage will hurt small businesses, already beleaguered by the pandemic. More than 110,000 restaurants have closed permanently or for the long term during the pandemic, according to the National Restaurant Association.

Increasing the minimum wage could lead employers to lay off some workers in order to pay others more, said David Neumark, an economics professor at the University of California, Irvine.

“There’s a ton of research that says increasing minimum wages can cause some job loss,” he said. “Plenty workers are helped, but some are hurt.”

A 2019 Congressional Budget Office study found that a $15 federal minimum wage would increase pay for 17 million workers who earned less than that and potentially another 10 million workers who earned slightly more. According to the study’s median estimate, it would cause 1.3 million other workers to lose their jobs.

In New York, State Senate Republicans had urged Gov. Andrew M. Cuomo, a Democrat, to halt increases that went into effect on Thursday, arguing that they could amount to “the final straw” for some small businesses.

While increases to the minimum wage beyond a certain point could lead to job losses, Ms. Bahn of the Washington Center for Equitable Growth argued that “we are nowhere near that point.”

Economic research has found that recent minimum-wage increases have not had caused huge job losses. In a 2019 study, researchers at the Federal Reserve Bank of New York found that wages had increased sharply for leisure and hospitality workers in New York counties bordering Pennsylvania, which had a lower minimum, while employment growth continued. In many cases, higher minimum wages are rolled out over several years to give businesses time to adapt.

Article source: https://www.nytimes.com/2020/12/31/business/economy/minimum-wage-15-dollar-hour.html

To many people, the economy will not noticeably improve for several months at least. Ms. Swonk expects hiring to have been unchanged or decline in December from November.

“The overall labor market is losing momentum at a critical juncture as cases soar,” she said.

On a seasonally adjusted basis, the number of new state claims was 787,000, a decrease from 806,000 in the previous week.

Stricter state and local restrictions on restaurants and other businesses will weigh heavily on the job market in the weeks ahead, said Scott Anderson, chief economist at Bank of the West in San Francisco.

Mr. Anderson expects that the monthly jobs report will show that the unemployment rate rose to 6.9 percent in December, from 6.7 percent in November. The unemployment rate has fallen sharply since peaking at 14.7 percent in April, but hiring has slowed as the economy has faltered in recent months.

The economy may only have gained about 20,000 jobs in December, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. That would amount to a “huge deceleration from last month,” she added, when payrolls jumped by 245,000.

What’s more, the pace of layoffs has been persistently high, as sectors like dining, travel and entertainment struggle because the pandemic is keeping many people at home even in states and cities that have not placed many restrictions on businesses. By contrast, many white-collar workers who have been able to work remotely have emerged from the economic turbulence relatively unscathed.

The introduction of vaccines is a bright spot, as are positive economic signs, like surging stock prices and a booming housing market. But it will be months before enough Americans can be inoculated to allow people to go to restaurants, events and movie theaters without fear of being infected.

Article source: https://www.nytimes.com/2020/12/31/business/economy/unemployment-claims.html

Bank fees are adding extra pain to some Americans’ pandemic-induced woes. In 2019, according to the Center for Responsible Lending, big banks collected more than $11 billion in overdraft fees from their customers, with 9 percent of customers paying more than 80 percent of the fees. For the first nine months of 2020, customers of big banks paid $6 billion in overdraft fees, according to Rebecca Borné, a researcher at the nonprofit, which advocates better treatment of consumers by financial institutions.

The total amount of penalty fees that bank customers paid in 2020 could end up being lower than last year, but because such a large amount of the penalties are paid by such a small subset of customers, the impact of those fees on their finances will most likely be far worse this year.

Aside from the temporary truces some banks have made with their customers around the stimulus checks, banks have not modified their overdraft policies during the pandemic, Ms. Borné said. “Charging unreasonably high fees, multiple fees per day, extended fees and other practices that manipulate the charges to maximize the fees — those practices hurt those struggling the most,” she said.

On Christmas Eve, Andrew Shorts, an artist living in Ogden, Utah, was scrambling to pay his electricity bill so that he would not lose power and heat. Mr. Shorts, who makes murals and graphic design projects for local businesses, has been locked out of his account at Zions Bank, a Salt Lake City-based lender, since a rapid fire of automatic deductions for household bills this fall pushed his balance $150 into negative territory.

When he called Zions two days before Christmas, a representative told him that he would probably have to pay the bank what he owed it and settle for the remainder. The bank changed its policy after President Trump signed the stimulus bill on Tuesday. A spokesman said Zions would zero out all negative balances of up to $2,000 for 30 days to let customers get their stimulus money.

Mr. Shorts described the $600 stimulus payment as “the equivalent of a pool noodle while my wife, child, myself and my now crippled business are drowning in the open sea.” But he still wants the money. In the meantime, he scraped together just enough to pay his electricity bill.

On the day Congress passed the latest stimulus legislation last week, Misha Roberts, a 26-year-old student at Ohio State University, could not bring herself to sign into her PNC online account and look up the balance. She knew it was somewhere between $1,200 and $1,700 in the negative, thanks to a combination of bills for basic expenses she could not afford, which were automatically deducted from her account, and overdraft fees.

Article source: https://www.nytimes.com/2020/12/31/business/stimulus-checks-overdraft.html

The result has often been referred to as a “K-shaped economy,” in which the well-off are on a rapid ascent while those with lesser means — and disproportionately Black, Hispanic and female workers — are suffering the pandemic’s economic consequences. As the rich get richer and more mobile in the work-from-home era, they’re buying houses.

America has Zoom towns.

Many middle-class millennials who lingered on the housing market’s sidelines for years reported that the pandemic had hastened their buying plans. They have been lured by the Fed’s pandemic-tied interest rate cuts, which have made mortgages cheap, and by the prospect of more space.

Some millennials, freed from office buildings by remote work arrangements, seem to be aiming for cities where single-family homes are relatively affordable — what some writers have labeled “Zoom” towns. People roughly ages 21 to 40 have accounted for a huge share of home purchase loans in places like New Castle, Pa., and Frankfort, Ind., according to data from Ellie Mae, a mortgage software company. At the same time, rents in pricey cities like New York, San Francisco and Boston have been dropping.

This $300 giant skeleton sold out.

As people found themselves spending time at home, many decided to finally fix the back porch or renovate the garden — or to invest in weirder types of décor. The Home Depot and its competitors had a good year in general as America shifted from spending on services to spending on goods as restaurants closed and far-flung vacations became off limits. But the home repair store saw that goods-over-experiences trend play out in a big way at Halloween. The company offered a $300 giant skeleton that became a national sensation, selling out before October even started. People went on to decorate the 12-foot frame for the holidays, to social media users’ delight.

Deficit spending got a celebrity endorsement.

Skeletons aren’t the only domain where some Americans decided that bigger might be better. A group of economists has been arguing for years that the United States needlessly shackles its potential by trying to contain the federal deficit. They say resource constraints are the real limit on how much the American government, which prints its own currency, can spend.

That idea — called modern monetary theory — attracted a lot of attention in 2020, particularly as some Democratic presidential candidates promised sweeping government spending programs. It even hit Hollywood. The actor and musician Ice Cube suggested in a tweet that America should be able to deal with problems like hunger and homelessness since it can print cash. Lest fans miss the point, he posted a follow-up photo of the economist Stephanie Kelton’s book on the theory, which came out in 2020.

Celebrity endorsement aside, the theory has many critics, and it is clearly not operative in Washington yet: Deficits were central to the debate over a $900 billion relief package that President Trump signed into law on Sunday night. But the government’s debt increased rapidly during the year as Congress and the White House stepped in to blunt the effects of the pandemic, so an era of bigger spending does seem to be upon us.

Article source: https://www.nytimes.com/2020/12/31/business/economy/2020-economy-trends.html