May 27, 2020
White House economic adviser Larry Kudlow on Tuesday told Fox News that the Trump administration is examining another round of stimulus for unemployed workers that will get them back to work.
Kudlow calls it the “back to work bonus,” a move that will bring people from off the sidelines and back into the workplace as the economy restarts.
A significant problem for the Trump administration has developed during the economic crash, unemployment benefits for some workers are now paying more than their old jobs did, which is set to delay the employment recovery.
Thanks to the March CARES Act which boosted unemployment benefits by $600 per week, around half of all US workers stand to take in more money while laid off than they did before the pandemic – at least until that increase expires at the end of July.
We noted last week that the CARES Act, which included a $1,200 stimulus check and an additional $600 weekly payment for the unemployed, has led to a labor shortage at one Arizona restaurant.
Times Square Italian Restaurant owner Paullette Cano said with an “unemployment rate at almost 20%, you’d think we’d have a lot of applicants coming in, but we’re not.”
Cano said the CARES Act and unemployment checks have resulted in many of her furloughed employees staying home. They collectively told her their pay from the government is much better than working at her restaurant.
“They don’t want to come back to work,” she said. “It’s the unemployment. They’re receiving about $840 a week, which puts them about $22 an hour.”
Moving on to the subject of China, Kudlow said that Trump is so “miffed” with the Chinese over the virus, that the trade deal is not longer his No. 1 focus concerning China – echoing comments that Trump himself made recently.
Commenting on the market’s rally on Tuesday, Kudlow said Q3 could see one of the biggest jumps in US GDP growth in history, and that the market is rallying on signs that we’ve “hit bottom”, and that the worst of the economic disruption is behind us.
Kudlow also said the administration would extend some assistance to US companies seeking to move parts of their supply chain back to the US from China.
Circling back to Kudlow’s comment on the “back to work” bonus,” we recently penned “When Work Is Punished: Did The ‘Generous’ CARES Act Just Guarantee High Unemployment Is Here To Stay?“ — where it was noted the CARES Act has the potential to create an entirely new generation of welfare serfs, subsisting on significant welfare benefits with no incentive to ‘get back to work’, even after the lockdowns are lifted. This will lead to a labor market that won’t recover anytime soon, thwarting any hopes of a V-shaped recovery this year.
The virus, to its credit, has triggered a dangerous policy response by the government of helicopter money that will effectively delay the recovery. Kudlow announcing the prospects for more stimulus to get people back into the workforce suggests the administration could be in the wrong for paying people more money to stay at home rather than what their prior job was paying — basically disincentivizing people to look for jobs.
This article was posted: Wednesday, May 27, 2020 at 2:11 am