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More signs of weaker economy point to a ‘double-dip’ recession

By Masao Suzuki |
December 18, 2020
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Masao Suzuki
Masao Suzuki (Fight Back! News/staff)

San José, CA - Last week the U.S. economy showed more signs of weakness as retail sales in November fell for the second month in a row and new claims for regular state unemployment insurance and the federal Pandemic Unemployment Assistance rose for the second week in a row. These are more signs of a weaker economy that point to a ‘double-dip’ recession.

Retail sales, including online orders, fell 1.1% in November. The October figure was revised down from a 0.3% gain to a 0.1% loss. Sales over the Thanksgiving weekend, which included Cyber Monday, were down 14% as compared to a year earlier. The slide in sales is a result of both a sagging job market as well as the fact that much of the earlier boom was in durable goods, like appliances and electronics, which are one-time purchases.

New claims for regular state unemployment insurance rose by 23,000 to 885,000 in the week ending December 12, when most mainstream economists expected a drop. This was the first back-to-back rise in unemployment insurance claims since July. The federal PUA also saw an increase in new claims, up 40,000 to 455,000. Continuing claims for both programs as well as the federal Pandemic Emergency Unemployment Compensation or PEUC, and the state Extended Benefits or EB programs jumped by 1.6 million to rise back above 20 million in the week ending November 28.

In the last few months since the end of the extra $600 in weekly unemployment benefits, the poverty rate has gone up by 24%. With almost 8 million more people below the official poverty line, the poverty rate has risen to 11.7% of the entire population. This is the biggest increase in the 60 year history of counting poverty in the United States. Hand in hand with rising poverty is more people needing food aid and millions more renters at risk of eviction next year.

A major factor in the slowing economy has been the surging pandemic in the United States, which has been hitting new record daily highs in terms of number of new infections, hospitalizations and deaths. There was a new record high of more than 3600 deaths in one day, and more than 110,000 people in the hospital just this past week - and many doctors say the worst is yet to come. This has led to more and more businesses closing as shoppers and diners cut back out of caution or because of government restrictions.

But still politicians are undermining public health efforts. In San Bernardino County in California, one local hospital is at 300% of capacity with half their lobby turned into a COVID ward, people in the hallways, a field hospital set up outside, and ambulances lined up with patients. Still the county supervisors voted to sue the governor for his stay-at-home order. The governor himself, Democrat Gavin Newsom, doesn’t help by breaking his own rules, dining with people outside his household at an elite French restaurant with a three-star Michelin rating and $1200 per person luncheons.

The pandemic is also hitting another center of world capitalism, Europe, hard this winter. Many countries there have restored stay-at-home orders as infections and deaths surpass their spring surge when Europe was the hardest-hit area in the world. Even Japan, which has had a relatively low level of COVID infections, has seen rising rates of infections and deaths. Only China, which was the first country to see a large outbreak, has an economy that has recovered after suppressing the virus early this year. China saw a daily average of only 23 new infections in the last week for a total population of 1.4 billion.

With many federal relief programs passed with the CARES act back in March about to expire at the end of the year, Congress seems close to a compromise bill with another $900 billion in aid. Still, much of this aid will be too little, too late as Republicans in the Senate dragged their feet on a new aid package since August, when the additional $600 per week in unemployment expired. While they say that they are worried about the cost, they had no problems with Trump’s tax cut almost twice as large that benefitted big corporations. Amazon, which has seen booming business during the pandemic, has paid only $162 million in taxes over the last three years, while make almost $25 billion in profits. This works out to a 0.6% tax rate. In contrast, the average U.S. household has a federal income tax rate of about 15%, 25 times higher than what Amazon pays.

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