In the wake of increased employment, the US is now poised to announce another positive development: retail sales have risen 8.0% last May. This further solidifies the fact that the US economy is beginning its road to recovery. This is the highest increase posted by the country, beating the previous record of 6.7% in October 2001, which was the month following 9/11.
Prior to the record numbers in May, retail sales fell in March by 8.3% and 16.4% in April, mainly due to the lockdown in major urban centers and the health advisory to stay indoors due to coronavirus.
The reopening of most cities in the United States after a months-long lockdown, drove people to head for car dealerships (44% increase from April) and spent more on fuel (13%), clothes (188%) and bars and restaurants (33%).
Analysts are seeing the US economy in the initial stage of V-shaped recovery, which is characterized as a sharp but short recession followed by a strong recovery.
New Coronavirus Stimulus Package
If US President Donald Trump would have his way, the new coronavirus stimulus package would include incentives to support Americans who want to go back to work. Previously approved stimulus packages provided extra money for the unemployed, and Trump and the rest of the Republican Party want it the other way.
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Trump Wants Work Incentives Included in Next Stimulus Bill, Not Additional Unemployment Insurance
In an interview with the Fox Business Network yesterday, the President remarked: “We want to create a very great incentive to work. So, we’re working on that and I’m sure we’ll all come together.” He noted that the recent stimulus packages created a disincentive for people to return to work. Republicans have argued that supplemental unemployment benefits encourage workers to stay at home instead of looking for a job. The GOP prefers benefits to go to workers returning to work.
Reps: It’s About Getting Americans Back to Work
During the interview, the President was adamant that Americans are raring to get back to work.
“It was an incentive, not to go to work. You’d make more money if you don’t go to work – that’s not what the country is all about…and people didn’t want that. They wanted to go to work, but it didn’t make sense because they make more money if they didn’t.”
Trump’s remarks gave a preview to what’s in store in Congress when hearings resume later this month to deliberate on the next stimulus package. Most likely, the Republicans will oppose any efforts made by Dems to renew the enhanced unemployment insurance, a provision that provides an additional $600 to unemployed workers, and is set to expire by July 31.
Senate Majority Leader Mitch McConnell (R-Ky) termed the supplement a “bonus not to go back to work.” The Kentucky senator has already vowed that the unemployment benefit included in the previous CARES Act in March won’t be included in the next phase of the coronavirus stimulus package, which is targeted for ratification by end of the month.
But that doesn’t mean that unemployment will not be addressed. McConnell clarified that
“Unemployment is extremely important. And we need to make sure, for those who are not able to recover their jobs, unemployment is adequate…that is a different issue from whether we ought to pay people a bonus not to go back to work. And so I think that was a mistake…and we’re hearing it all over the country that it’s made it harder actually to get people back to work. But to have the basic protections of unemployment insurance is extremely important and should be continued.”
Republicans have instead favored back-to-work bonuses instead of additional unemployment benefits. Senator Rob Portman (R-OH) proposes giving Americans who return to work a $450 weekly bonus, while Representative Kevin Brady (R-TX), has proposed giving returning workers a one-time $1,200 payment.
Dems: Extend the Unemployment Insurance, but With Some Conditions
On the other side, while Democrats are pushing to extend the enhanced unemployment benefits, they did so with some form of control in place. For starters, the program will phase itself out once the state reports a lowering of unemployment rates to a certain threshold. This gives the benefit an end that is synced with a change in economic conditions, a marked improvement compared to the ongoing provision that features an arbitrary end date.
Senate Minority Leader Chuck Schumer (D-NY), who introduced the bill with Senate Finance Committee member Ron Wyden(D-Or), said cutting off the benefit can potentially mean that “millions of American families will have their legs cut out from underneath them at the worst possible time — in the middle of a pandemic when unemployment is higher than it’s been since the Great Depression.”
The Dem’s proposed legislation would extend unemployment insurance through March but would lower its amount depending on how well the economy recovers, especially with unemployment numbers. It would be cut by $100 for every percentage point the jobless rates fall below 11%, and will phase out when it slides below 6%.
So, Which Is Which?
With deliberations set to begin as soon as both Houses resume work on July 20, there is pressure to have something in place prior to July 31 expiration of CARES Act. Fortunately, there seems to be a large common ground where both Republicans and Democrats can coexist. With cases of coronavirus spiking again and in higher numbers, some of the larger states have begun holding back on their plans to reopen their economy. A continued stimulus package would help the majority of Americans to deal with this unique global phenomenon, and may yet again help boost the economy like it did the last time. As to what extent the support will turn out to be, Congress has its work cut out for its players.
Watch Trump’s talk about the new coronavirus stimulus package:
Outside of party lines, do you agree with the complete removal of additional unemployment benefits and instead reward Americans who went back to work instead? Or, do you prefer additional support for the unemployed?
5 Little-Known Ways To Lower Your Taxes
Everyone loves to pay lower taxes, but very few people understand or take advantage of all the tax breaks that are available to them. Here’s a list of 5 little-known tax breaks that you can use to help lower your tax bill.
1. Pay No Capital Gains Tax
If you sell an asset you’ve owned for more than a year, you pay long-term capital gains tax of either 0%, 15% or 20%. This is a favorable tax treatment when compared to selling assets you’ve owned for less than a year, which are taxed at the same rate as your ordinary income.
But, it’s possible to pay no capital gains tax when selling your long-held assets like stocks and bonds or mutual funds. In order to pay no capital gains tax, your taxable income needs to be less than $39,375 if you are single or $78,750 if you are married when filing your 2019 taxes. For the 2020 tax year, those numbers jump slightly to $40,000 and $80,000.
2. Earned Income Tax Credit
This program directly benefits those with low-to-moderate incomes, and particularly those with children. A single filer would need an adjusted gross income of $15,570 or less to benefit, but for a married individual with three children, the adjusted gross income limit is as high as $55,952. In certain situations where your EITC benefit exceeds the amount of taxes you owe, you would receive a tax refund.
3. Deduct Your Retirement Account Contributions
If you are putting money aside in a traditional IRA as part of your retirement plan, you can contribute up to $6000 per year. If you aren’t part of a retirement plan through work – like a 401(k) – you can deduct all of your contributions no matter what tax bracket you are in. Non-working spouses (or spouses making very little income) can contribute up to $6,000 ($7,000 if 50 or older) into their own IRA account as long as the working spouse has enough earned income to cover both contributions. There are limits to the deductions as income increases, so check with a tax adviser.
4. Saver’s Tax Credit
If you are a single filer with adjusted gross income less than $32,000 (or $64,000 if married) you claim a tax credit (a credit, not deduction – more on this in a moment) of 10%, 20% or 50% of the first $2,000 you put into a retirement account ($4,000 for married filers). The lower your income, the higher the credit amount. Unlike a deduction that lowers your taxable income, a credit reduces the amount of taxes you owe on a dollar-for-dollar ratio. So a $2,000 tax credit reduces your taxes by $2,000.
5. Lifetime Learning Credit
If you are interested in continuing your education, you can utilize the Lifetime Learning Credit. This allows you to go back and study nearly any topic, at any school, you can get back 20% of up to $10,000 in expenses per year. The income limits are $68,000 for single filers and $136,000 for married filers. Now go back and enroll in that art class you always wished you had taken!
Trump Says Economy ‘Roaring Back’ in June As 4.8 Million Jobs Added
The economy added back 4.8 million jobs last month, according to the government’s June jobs report released yesterday. That handily beat the 3.7 million jobs forecasted by economists and dropped the unemployment rate down to 11.1%.
After the report was released, President Trump said the economy was “extremely strong” and “roaring back” after the country has regained more than 7.5 million jobs in the last two months. Trump added that the economy will keep growing unless voters elected Democrat Joe Biden in November. He said Biden would raise taxes and hurt the economy and the stock market would “drop down to nothing.”
Of the jobs added back in June, bars and restaurants hired – or rehired – 1.48 million workers. This comes as many reopened for outdoor dining in the early phases of the reopening. They brought back a similar number of workers in May. It happened after shedding more than 6 million jobs due to the pandemic.
The retail sector regained 740,000 jobs, healthcare added back 358,000 workers, and manufacturing saw 356,000 jobs added.
The energy sector continues to be battered by low oil prices amidst the economic slowdown. Additionally, that industry shed an additional 10,000 jobs last month.
The return of lower-paying jobs like those found in the restaurant and hospitality industry dragged down the average hourly wages for the second straight month.
Many are cautioning against reading too much into reports like average hourly wages while the economy is in such turmoil.
Stephen Stanley, chief economist of Amherst Pierpont Securities, says, “The wage figures will be pretty much useless for a long while until the labor market gets back to some semblance of normality.”
Andrew Chamberlain, chief economist of the job site Glassdoor, also gave an explanation. He added, “Today’s positive jobs report does provide a powerful signal of how swiftly U.S. job growth can bounce back and how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months.”
Unfortunately for many of the workers recently rehired to work in bars and restaurants, the recent spike in new coronavirus cases could lead to those jobs quickly being lost for a second time. Bars in many states are being shut down again in an effort to curb the growing number of cases.
The unemployment rate fell for the second straight month. However, the Bureau of Labor Statistics is trying to fix a reporting error that, if corrected, would increase the unemployment rate by 1%.
The problem is how households respond to the monthly survey that is used to calculate the unemployment rate. The jobless rate would have been 1 point higher if not for continued problems in how respondents answer the question about their employment status.
What many consider the “real” unemployment rate, which is the U6 rate, includes workers who can only find part-time jobs. It also includes those who’ve become too discouraged to look for jobs because so few are available. Using that measurement, the unemployment rate stands at 18% in June, down from 21.2% in May.
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