Update on the Stimulus: While Economic Conditions May Worsen, They Do Not Deserve Another Check at This Time!
It’s no secret that many Americans are currently experiencing financial difficulties. Not only has inflation pushed up living costs, but the Ukraine crisis has also pushed up gas prices. Many households are truly unable to make ends meet because they do not have savings to tap — either because they depleted their cash reserves during the pandemic or because they never had money in the bank, to begin with.
In fact, many people in need are hoping that Congress will approve a fourth stimulus package. But, in order for that to happen, the US economy would have to take a serious turn for the worse, i.e., enter a recession. Even though recession warnings are already flashing, that is not where we are right now.
Are We on the Verge of a Recession?
Despite inflation, the US economy is doing well right now. In fact, despite the fact that inflation hurts cash-strapped consumers, it’s easy to argue that it’s a sign of a healthy economy.
When demand for goods exceeds supply, the cost of living often rises. And when demand is high, it means people have money to spend.
Meanwhile, the labor market in the United States is nice and strong. There were 11.27 million job openings in February, which is about 5 million more than the number of unemployed people. Jobs were much harder to come by the last time stimulus checks were distributed.
However, the bond market recently issued a warning that has previously been associated with a recession: an inverted yield curve for US Treasury bonds. Longer-term bonds typically yield a higher return than shorter-term bonds. What is the reason for this? Long-term investors take on a higher level of risk.
The yield curve briefly inverted earlier this week, meaning that the yield on a 10-year Treasury bond fell below the yield on a two-year Treasury bond. While the inversion was only temporary, we’ll have to wait and see if it occurs again.
To be clear, there’s no need to raise the specter of a coming recession. At the same time, the current state of the economy is not dire enough to warrant a fourth round of stimulus. And that is something that Americans will have to come to terms with.
Making Ends Meet in a High-cost Environment
Unfortunately, cash-strapped households today may be forced to work extra jobs in addition to their regular jobs to make ends meet. The good news is that the gig economy is rife with such opportunities. Those who are willing to put in the effort may be able to increase their earnings enough to cover the expenses that their regular paychecks cannot.
Of course, if the economy continues to deteriorate, lawmakers may begin to discuss the fourth round of stimulus. As it stands, some lawmakers are advocating for a gas-specific stimulus that would be paid out only when fuel prices are extremely high, as they are right now. But, for the time being, the gas stimulus is just that: an idea, and it’s not a windfall anyone should be counting on just yet.
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