A study by two economists from the Federal Reserve Bank of Kansas City on the effects of Federal government’s COVID-relief stimulus packages on the US economy found that they were beneficial in general, but that long-term effects still are unknown.
“We find that these fiscal policies largely benefitted segments of the economy most in need of relief funds at a time of great economic and public health uncertainty,” said Huixin Bi and Chaitri Gulati, in a Federal Reserve Bank release.
The COVID-19 pandemic dealt a sudden shock to the US economy as state and local governments implemented restrictions and individuals took preventative measures to slow the spread of the virus, the release said. In response, Congress enacted unprecedented policy relief measures to support households, businesses and the broader economy.
To date, six federal relief bills—costing about $6 trillion—have passed into law, implementing new programs as well as policies used in previous recessions, the bank said. Compared with previous fiscal stimulus responses, these relief programs have been unmatched in size and scope, speed of response and novelty of design.
“Recent research finds that stimulus checks provided much needed financial support to vulnerable populations, such as liquidity-constrained and low-income households, particularly by supporting spending on necessities and recurring payments,” the economists said. Augmented Unemployment Insurance benefits resulted in high replacement rates but appear to have had limited negative effects on employment in the short run, with significant positive effects on consumption. And despite the implementation challenges associated with the Paycheck Protection Program, the program likely boosted employment and preserved small business capacity, as intended, though the effects appear to have been modest.”
VARIED RESPONSES
However, many households who did not suffer income losses during the pandemic put the money into personal savings, so the full boost to consumption has yet to be seen, the economists said. They also found that augmented UI benefits fully replaced earnings for the majority of recipients who lost jobs.
Empirical studies so far suggest a limited short-term effect on the labor market from the UI policies, at least through the third quarter of 2020, but as public health concerns fade, economists may be better able to gauge the importance of augmented UI as a disincentive to work.
Third, they found that the PPP aided the continuity of the small business sector and provided a modest boost to employment, though funds did not always flow to firms most at risk. But because the PPP’s effects are still unfolding, it may be too early to judge the program’s success.
Overall, the fiscal policy response to the pandemic downturn largely benefitted segments of the economy most in need, especially early in the pandemic.
CATTLE, BEEF RECAP
Fed cattle traded this week at $120 to $125 per cwt on a live basis, steady to down $1.50 from last week, and at $196 to $202 on a dressed basis, down $1 to $2.
The USDA choice cutout Thursday was down $2.93 per cwt at $281.97, while select was off $2.02 at $260.06. The choice/select spread narrowed to $21.91 from $22.82 with 103 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.07 to $1.15 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.70 over Sep, which settled at $5.36 3/4 a bushel, down $0.06.
The CME Feeder Cattle Index for the seven days ended Wednesday was $151.51 per cwt up $5.79. This compares with Thursday’s Aug contract settlement of $157.32 per cwt, down $1.67.