Another 712,000 Americans filed first-time jobless claims

New York (CNN Business)The economic recovery is rapidly losing momentum, and millions of Americans are counting on Uncle Sam to come to the rescue. Yet politicians have so far failed to reach a deal on what should be a no-brainer: more fiscal relief.

Evidence is mounting that this summer’s rapid rebound is slowing as the pandemic intensifies.
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Hiring is slowing. Unemployment claims remain unthinkably high. GDP is decelerating and could soon turn negative. And real-time indicators show that recoveries in restaurant reservations, air travel and hotel bookings have been derailed as Covid-19 cases, hospitalizations and deaths surge.

    If no stimulus deal is reached by the end of the year, millions of Americans will lose benefits and families will slip into poverty. The inaction from Congress risks plunging the economy back into recession.
    “The recovery hasn’t quite stalled out, but it’s going to be weak as we head into the first quarter,” Ethan Harris, head of global economics at Bank of America, told CNN Business.

    ‘Stop fooling around’

    Friday’s monthly payroll report is expected to show the United States added 469,000 jobs November, a slowdown from the 638,000 jobs added the month before. Harris warned there’s a “pretty good chance” hiring will soon turn negative — meaning the nation will once again be losing jobs on a monthly basis.
    “It would be a wake-up call to Washington to get moving on a fiscal package,” said Harris. “There is no outside force intervening telling Congress to stop fooling around and get to work.”
    Normally, politicians would be under fire from financial markets. But that’s not the case today as investors celebrate coronavirus vaccine breakthroughs that brighten the 2021 outlook.
    The Dow just notched its best monthly performance since 1987. The S&P 500 is at record highs. The CNN Business Fear & Greed Index of market sentiment is flashing “extreme greed.”
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    That’s despite the fact that the daily death toll from the pandemic just hit a record of 2,804 — and some experts fear it will soon approach 4,000. A record-high 100,226 Covid-19 patients are hospitalized in the United States.
    “The markets are numb to those numbers,” said Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence.
    Booth said that investors and Wall Street economists are squarely focused on June 2021, when vaccines could allow for a robust reopening of the economy. However, she added, “I don’t think they’re taking into account what can occur between now and then.”

    The stakes couldn’t be higher for millions of Americans

    The good news is that stimulus talks have gained momentum in recent days. A bipartisan group of lawmakers unveiled a $908 billion framework that would provide state and local aid, unemployment insurance, small business loans and funds for the rollout of vaccines.
    Democratic leaders have embraced the bipartisan plan, but Senate Majority Leader Mitch McConnell dismissed the package and unveiled a slimmed-down version worth around $500 billion.
    However, McConnell expressed cautious optimism about a deal. “Compromise is within reach,” he said Thursday on the Senate floor. “We know where we agree. We can do this…And we need to do this.”
    Trump said the stock market would crash if Biden won. The Dow just had its best month since 1987.
    Without Washington action, critical unemployment programs and other safety nets will soon expire.
    About 12 million workers are at risk of losing their benefits, according to The Century Foundation, a progressive think tank. That’s because two main programs under the CARES Act — one that covers self-employed and gig workers, and another helping those who have been unemployed for longer periods — are scheduled to end December 26.
    In March, the government suspended payments and waived interest on federal student loans. But if neither Congress nor the Trump administration act, millions of student loan payments will come due early next year.
    Likewise, the Centers for Disease Control’s temporary halt on evictions of renters who meet certain requirements is due to expire at the end of the year.
    “An extraordinary number of single mothers will be evicted if there isn’t an extension. I don’t think this is something that either party wants,” Booth said.

    Double-dip recession fears

    The business community is starting to get more worried about the recovery and gridlock in Washington, according to the newly released Beige Book, a Federal Reserve collection of anecdotes from businesses.
    “Many contacts cited concerns over the recent pandemic wave, mandated restrictions (recent and prospective) and the looming expiration dates for unemployment benefits and for moratoriums on evictions and foreclosures,” the Beige Book said.
    Economists at Jefferies called it “one of the most troubling Beige Books we have seen in a long time” and evidence that “risks of a double-dip are starting to increase.”
    “A long, dark winter is ahead for many businesses before the sun rises with a vaccine in Q2,” Jefferies wrote in a note to clients Wednesday.
    Major companies including ExxonMobil, Wells Fargo, Charles Schwab and Disney have announced plans to cut thousands of jobs. Even 3M (MMM), a company benefiting from intense demand for its highly sought-after N95 mask, is cutting nearly 3,000 jobs.
    The CNN Business Recovery Dashboard of real-time indicators shows how parts of the economy are rolling over:

    • Restaurant reservations on OpenTable are down by 68% from a year ago, compared with negative 14% in early September
    • The number of airport travelers is two-thirds lower than a year ago
    • Hotel occupancy has fallen by a third, versus a 19% drop in early September
    • Small business work hours have shrunk 20% from pre-crisis levels

    Of course, some parts of the US economy are doing quite well.
    The housing market is still booming, driven by record-low mortgage rates and a rush to buy homes in the suburbs. E-commerce is growing rapidly, with countless shoppers turning to Amazon (AMZN), Etsy (ETSY) and the websites of Walmart (WMT) and Target (TGT).
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    Yet the pandemic is accelerating the demise of physical stores — and those are the ones that employ the most workers. That means the hiring boom for seasonal retail workers may not materialize.
    “Brick-and-mortar is really going to suffer this holiday season,” said Harris, the Bank of America economist. “We’re likely to see a holiday season that looks okay from a sales perspective, but not from a salesperson perspective.”
    The risk is that Washington’s political divide causes the US economy to slip into a painful double-dip recession before vaccines are widely distributed to the public.

      “If we’re going to have a nice second wave of recovery,” Harris said, “you need both the vaccine and a fiscal package.”
      That last part is up to Washington.
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