Dow went up 110, advancers over decliners better than 2-1 & NAZ gained 69. The MLP index fluctuated in the 182s & the REIT index added 2+ to 467. Junk bond funds inched higher & Treasuries were heavily purchased, bringing the yield on the 10 year Treasury under 1.19%. Oil was off 1+ to the 72s & gold inched up 1 to 1818.
AMJ (Alerian MLP index tracking fund)
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Expanded federal unemployment benefits, put in place as an emergency measure during the COVID-19 pandemic, are on course to become another long-term "welfare trap," a gov fiscal watchdog group warns in a new report. Under emergency response legislation, the federal gov expanded eligibility for unemployment benefits, extended the number of weeks & gave bonuses to state unemployment benefits. The expansion will sunset in Sep, but congressional Dems have pressed Pres Biden for an extension. The benefits have been extended before. "It has started to look more like welfare and more like another piece of the welfare package. It’s starting to look like a long-term benefits program rather than a short-term temporary supplement it was supposed to be," Alli Fick, a senior research fellow with the Foundation for Government Accountability (FGA), said. "Unemployment insurance program should promote work and reject government dependency." Fick wrote in the FGA study that dug into the legislative history of federal unemployment insurance when it began in 1935 as part of the New Deal, going thru committee reports & hearing debates. "Unemployment insurance cannot give complete and unlimited compensation to all who are unemployed," the 1935 House Ways and Means Committee report on the legislation states. "Any attempt to make it do so confuses unemployment insurance with relief, which it is designed to replace in large part. It can give compensation only for a limited period and for a percentage of the wage loss." But now, jobless benefits are available for more than a year, according to the FGA report titled, "How Unemployment Benefits Have Become the New Welfare and How to Fix It." "Instead, unemployment benefits were meant to temporarily tide over the average worker," the report states. "But unfortunately, due to the recent COVID-19-related changes, unemployment insurance has been morphed into more of a long-term benefits program. The Pandemic Emergency Unemployment Compensation program now extends unemployment insurance by an additional 53 weeks."
Short-term expanded jobless benefits becoming long-term issue, warns report
The coronavirus delta variant has already led some officials to reinstate mask mandates, but Minneapolis Federal Reserve Pres Neel Kashkari warns that it could also hinder the economy's comeback. Kashkari observed that the more transmissible delta variant is breeding "caution" among Americans, which has contributed to hesitancy when it comes to going back to work. "I was very optimistic the fall would be a very strong labor market with many of those Americans coming back to work," he added. "That's still my base-case scenario, but if people are nervous about the delta variant, that could slow some of that labor market recovery and therefore be a drag on our economic recovery. So the sooner we can get people vaccinated – the sooner we can get delta under control – the better off our economy’s going to be." He noted that in addition to caution about contracting the illness, there are more indirect factors behind people not returning to work. These include having issues with child care as well as enhanced unemployment benefits. Those benefits, Reps have warned, have led to a lack of motivation to return to work because in some cases the benefits pay more than the jobs people had. Reps have urged the administration to end the enhanced benefits, which provide an extra $300 per week. It is set to expire Sep 6. In May, Biden warned that people who turn down job offers could lose their benefits. So far, 26 states have opted out of the enhanced benefits 7 require people collecting unemployment to look for work.
Delta variant concern could slow economic recovery, Fed's Kashkari warns
The Treasury Dept will begin conducting emergency
cash-conservation steps today to avoid busting the federal borrowing
limit after a 2-year suspension of the debt ceiling expired at the
end of Jul. Economists say those so-called extraordinary measures will allow Treasury to pay off gov bills without floating new debt for 2-3 months. After that, Congress will need to either raise or suspend
the borrowing limit or risk the US defaulting on its obligations. The
limit, a facet of American politics for over a century, prevents the
Treasury from issuing new bonds to fund gov activities once a
certain debt level is reached. That level reached $22T in Aug
2019 & was suspended until Sat. The new debt limit will
include additional borrowing since summer 2019. The
Congressional Budget Office estimated in Jul that the new cap will
likely come in just north of $28.5T. Though the federal gov has never defaulted, economists say such an event would have disastrous effects on the US economy by spiking interest rates. “The
government needs to have funds, for example, to pay interest on its
debt, and if it were to stop paying interest that could be extremely
unsettling for financial markets,” Harvard University economics
professor Karen Dynan said. These funds are
needed to pay gov workers & send out Social Security checks. “People
depend on that money and could suffer a lot of hardship if they don’t
get it as scheduled.” Still,
near-certain economic calamity hasn't stopped politicians from using
the debt ceiling as a political football over the years.
Treasury Dept to invoke ‘extraordinary measures’ as Congress misses debt-ceiling deadline
It's difficult to see where enthusiasm by investors is coming from. Maybe it's from Congress taking a 5 week holiday which will limit the damage they can do. Senators are reading the infrastructure package with needed repairs & plenty of pork. They finally finished writing the 2000+ pages yesterday. But hopes are high for favorable Jul economic data. Also, raising the debt ceiling can not be dealt with until next month at the earliest by a dysfunctional Congress. Not good for the economy which has been on the mend in the last year.
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