Strong retail sales boost optimism before U.S. election, but it may be short lived

By Jonnelle Marte

(Reuters) – In an ordinary presidential election, Friday’s retail sales report would have been a dream for an incumbent like Republican President Donald Trump. Headline sales topped expectations by a wide margin and spending was up from August in all but one of the major categories.

Still, this is no ordinary election. Despite the gains seen in September, spending in key sectors that suffered massive job losses during the pandemic, such as restaurants and clothing stores, remain deeply below last year’s levels.

The report from the Commerce Department offered a reminder that millions of Americans are still out of work, leaving them with less money to spend on dinners out or new outfits. Without a vaccine or effective treatment, many consumers also hesitate to head out to stores or restaurants where they may be exposed to the virus.

On the one hand, the retail report showed that overall retail spending is now above pre-pandemic levels. That is a sign that some people may have spent the $300 supplement the federal government temporarily added to unemployment benefits. Other people may have boosted spending after being called back to work.

If more people continue to see their finances improve, that could bode well for the economy and for the overall outlook people carry when they vote in the Nov. 3 election.

But some economists are also questioning whether the increase in spending seen in September will continue with virus infections rising, job growth stalling and government aid fading.

Enhanced unemployment benefits and direct cash payments distributed as part of the CARES Act made it possible for jobless Americans to boost spending and pad their savings. But much of those savings were spent in August after the supplement to unemployment benefits expired, according to a study released Friday by the JPMorgan Chase Institute.

The White House and Congress have yet to reach a deal on another package. Job growth is also slowing and the number of Americans filing new claims for jobless benefits reached a two-month high last week.

“The progress we’ve made, which has been better than expected, may be slowing,” said John Briggs, head of strategy for the Americas at NatWest Markets. “I don’t know how much it hurts Trump’s chances, but I don’t see how it can help him.”

(Reporting by Jonnelle Marte; Editing by Andrea Ricci)

Americans on COVID-19 jobless benefits spent more than when working, study shows

By Jonnelle Marte

(Reuters) – Americans who received enhanced unemployment benefits due to the coronavirus pandemic spent more than when they were working, a study released on Thursday said, adding to concerns about a steep fall in spending when the emergency benefits expire.

The $600 weekly supplement added to jobless benefits as part of the CARES Act helped unemployed households spend 10% more after receiving benefits than they did before the pandemic, according to research by the JP Morgan Chase Institute.

Researchers analyzed transactions for 61,000 households that received unemployment benefits between March and May. Spending dropped for all households as the virus spread and led to business shutdowns, but then rose when households began receiving jobless benefits, the study found.

That contrasts with a typical recession, when households receiving unemployment benefits usually cut spending by 7% because regular jobless benefits amount to only a fraction of a person’s prior earnings, the research found.

The analysis highlighted how the additional unemployment benefits are helping to prop up the U.S. economy and consumer spending after the pandemic led to a surge in joblessness across the country.

More than 30 million Americans are estimated to be receiving unemployment benefits – and they could be pushed off an income cliff when the supplemental benefits, which are due to expire at the end of July, are withdrawn.

“Our estimates suggest that expiration will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” the researchers wrote.

The data also reflected the financial pain faced by households that encountered big delays in collecting benefits after states across the country were overwhelmed by applications.

Households that had to wait several weeks for their first unemployment check to arrive cut spending by about 20%, the study found. Spending recovered after the checks arrived.

(Reporting by Jonnelle Marte; editing by Richard Pullin)

U.S. says Alaska, Delta, JetBlue, United, Southwest seek COVID aid

WASHINGTON (Reuters) – Five additional U.S. air carriers – Alaska Airlines, Delta Air Lines, JetBlue Airways, United Airlines and Southwest Airlines – plan to seek federal loans amid the novel coronavirus outbreak, the U.S. Department of Treasury said on Tuesday.

The airlines had signed letters of intent regarding the terms under which they could receive U.S. funds under coronavirus relief law known as the CARES Act, Treasury Secretary Steven Mnuchin said in a statement.

“We look forward to working with the airlines to finalize agreements and provide the airlines the ability to access these loans if they so choose,” he said.

Four other airlines – American, Frontier, Hawaiian and Sky West – had already sought out federal aid under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the department said last week.

National lockdowns amid the global coronavirus pandemic has crippled the industry, although travel has picked up in some areas as economies open up.

Airlines have until Sept. 30 to decide whether to take the loan and can furlough or eliminate jobs starting Oct. 1.

(Reporting by Susan Heavey; Editing by Doina Chiacu and Nick Zieminski)

U.S. Treasury to start distributing $4.8 billion in pandemic funds to tribal governments

By Andrea Shalal

WASHINGTON (Reuters) – The U.S. Treasury Department will begin distributing $4.8 billion in pandemic-relief funds to Native American tribal governments in all U.S. states on Tuesday, the Treasury and Interior Departments said in a joint statement.

Payments would begin Tuesday to help the tribes respond to the novel coronavirus outbreak, based on population data in U.S. Census figures, the statement said, while payments based on employment and expenditure data would be made at a later date.

Amounts calculated for Alaska Native Claims Settlement Act regional and village corporations, for-profit businesses that serve tribal villages in Alaska, would be held back until pending litigation relating to their eligibility was resolved, they said.

The decision frees up about 60% of the $8 billion in funds earmarked for Native tribes in the CARES Act, after delays caused by a legal dispute among the nation’s native populations over who is entitled to the aid.

Some tribes in the lower 48 states had sued to say the Alaska tribal corporations were not eligible for the aid since they were not tribal governments.

The Treasury and Interior departments have decided to proceed with disbursing some of the aid while the litigation continues.

Native tribes have been seriously impacted by the outbreak, with the Navajo Nation, which resides in Utah, New Mexico and Arizona, trailing only the hardest-hit states New Jersey and New York in terms of the highest infection rate, according to Bettina Ramon, with the People for the American Way think-tank.

Health disparities, higher rates of poverty and a lack of insurance make tribal groups especially vulnerable, she said, noting casinos, a big source of income in some Native communities, were also omitted from the federal Paycheck Protection Program.

Treasury would distribute the remaining 40% of the $8 billion based on the total number of persons employed by the Native tribes and any tribally-owned entity, the statement said, as well as the amount of higher expenses faced by the tribe in the fight against the virus.

Treasury would work with the tribes to confirm employment numbers and seek additional information regarding higher expenses due to the public health emergency.

The pending litigation had introduced additional uncertainty into the process of making payments to the tribes, but Treasury said it was working to “make payments of the remaining amounts as promptly as possible consistent with the Department’s obligation to ensure that allocations are made in a fair and appropriate manner.”

(Reporting by Andrea Shalal, Editing by Franklin Paul and Bernadette Baum)

Americans are spending coronavirus checks on rent and groceries

By Jonnelle Marte

(Reuters) – When Jessica Rosner saw the $1,200 coronavirus relief payment from the U.S. government was deposited into her bank account Wednesday morning, the furloughed behavioral therapist knew immediately how she would spend the cash.

The unemployment benefits she applied for two weeks ago have yet to come through. And Rosner, 23, who lives near Fort Lauderdale, Florida, still owed nearly $1,500 for April’s rent and about $200 for car insurance.

The “Economic Impact Payments” being issued under the $2.3 trillion CARES Act passed by Congress last month started landing in consumers’ bank accounts this week. The relief payments of up to $1,200 per adult and $500 per child are meant to soften some of the economic damage caused by the pandemic.

Americans’ lives have been upended by the crisis, with most schools and businesses closed, vacations canceled, and families mourning the more than 31,000 people killed by the virus.

The relief money is arriving in bank accounts as states across the country struggle to process unemployment claims filed by more than 22 million Americans over the past month, and helping some people cover the essentials.

“It’s going to get used quickly because there are so many people who need money right now,” said Claudia Sahm, a former Federal Reserve economist and now the director of macroeconomic policy at the Washington Center for Equitable Growth.

Preliminary results from a survey Sahm is conducting with Google and the University of Michigan suggest U.S. families plan to spend the money on essentials or pay off debt, Sahm said. That is the way stimulus checks were used during the financial crisis of 2008 and to counter an economic slowdown during the summer of 2001, she said.

Some people said they were planning to save the cash temporarily, an indication the payments may not lead to the immediate economic stimulation hoped for by the government.

Hyniah Herrin, 26, wanted to enroll in college this fall but put those plans on hold after she lost her two part-time jobs as a school bus driver and restaurant host in Philadelphia. The stimulus money landed in her bank account on Monday, and she’s holding on to it. “We don’t know when we’re going to be able to resume life,” Herrin said.

Steve Davison, 61, says the workload in his part-time job handling social media advertising for a forklift distributor hasn’t decreased because of the coronavirus outbreak. But Davison, who has not received a payment yet, said he is still living paycheck to paycheck and is worried about the future.

After he pays an old tax bill, he plans to hold on to the rest of the cash. “I’m just going to stash it because you never know what’s going to come up,” said Davison, who lives in Jersey City, New Jersey.

Treasury Department Secretary Steven Mnuchin said earlier this week that more than 80 million Americans would have the money deposited directly into their bank accounts by Wednesday morning.

Those who haven’t received the money can check their status and provide bank account information through a new “Get My Payment” app. Paper checks bearing President Donald Trump’s name on them will be sent out starting early next week to people who don’t use direct deposit.

(Reporting by Jonnelle Marte; Editing by Heather Timmons and Paul Simao)