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reWeek-long attempts by Congress and the government to agree on a new aid package have so far been unsuccessful. This now has serious consequences. In the absence of new government aid, several US airlines carried out their threats to part ways with tens of thousands of employees on October 1. American Airlines and United Airlines put more than 32,000 employees on compulsory leave. With a 70 percent drop in sales compared to the previous year, airlines are among the companies hardest hit by the pandemic crisis.
A month before the presidential election, Donald Trump threatens bad headlines in the job market. Walt Disney waited for the television debate between the US president and his Democratic challenger Joe Biden to go ahead with the announcement that 28,000 employees would be laid off. Hollywood had already sounded the alarm in a letter to the leaders of Congress. America’s cinemas with 150,000 employees are at risk if help doesn’t arrive quickly. Two thirds of cinema operators are threatened with bankruptcy. On the same day, the hotel industry’s call for help reached Congress: Without quick financial injections, countless companies would have to give up. That would have serious consequences for employment: according to an association survey, three out of four hotels want to fire their employees if aid does not arrive soon. The industry has already lost around 800,000 jobs since March.
AHLA hotel association director Chip Rogers illustrated the problem of state bailout policy. The rescue program approved in March was designed to help businesses through an eight to ten week dry spell. “But now we’ve been in the middle of that for almost half a year,” Rogers complained.
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Trump and the two parties in Congress basically agree that a new aid package is needed. However, there is disagreement about its scope. Republicans point out that the US economy has emerged from the depression much faster than anticipated. In fact, until a few weeks ago, the data indicated a V-shaped economic trend, fueling the hopes of Trump and Republicans that a small bailout might be enough. But recently the recovery stalled and new claims for unemployment benefits did not decline. The United States still employs about 10 million fewer Americans than at the beginning of the crisis.
Negotiations are also apparently hampered because President Trump intuits the possibility of blaming democratic governors for the crisis. In the television debate, Trump accused the Pennsylvania governor of maintaining trade and exit restrictions until November to harm him. The victims are the little people. This line of reasoning is reinforced by the leadership of Walt Disney. The company has blamed the California government for its layoffs and its “unwillingness to lift restrictions.” This was addressed to Governor Gavin Newsom of the Democratic Party, who has yet to allow his state’s amusement parks to resume operations due to the Corona crisis. The world famous Disneyland amusement park near Los Angeles remains closed, like the only one in the United States.
But that’s only half the story: Walt Disney is also laying off thousands of employees in Republican-ruled Florida. There, the parks are open under certain conditions, but still have far fewer visitors than in normal years. This evolution in turn confirms a study by the economist Austan Goolsbee, according to which it is not the official requirements, but above all the fear of infection and private precautionary measures that harm the economy. In fact, the latest consumer data now points to completely new consumer behavior. During the summer, people spent more money on consumer durables and much less on catering or travel services.
Many people save out of fear
Consumption is likely to decline overall because the unemployed in particular have significantly less money after the federal government’s aid program has expired. Others fear layoffs and prefer to save.
Concerns that the return will not go as well as expected may have increased the government’s willingness to negotiate. Finance Minister Steven Mnuchin had sought a compromise with Nancy Pelosi, head of the House Democrats, on Wednesday, so far to no avail. Democrats have proposed a $ 2.2 trillion aid package, and Mnuchin is sympathetic to the $ 1.5 trillion proposal. And Republicans in the Senate are generally dismissive. They were “very, very far away,” his boss, Mitch McConnell, had made clear. Above all, he wants to prevent states and municipalities from receiving federal aid, as the Democrats propose. However, it is doubtful that he can maintain the dismissive attitude if Trump fears for his own continued employment in the White House due to bad headlines from the job market.
