WASHINGTON (CNN) — A resilient US job market in May and June fed investor hopes that a strong economic recovery could quickly power the country out of a crippling recession occurring amid a global health crisis. But, the jobs report for July, due this week, may serve as a reality check, raising pressure on Congress to push through another round of stimulus spending.
Higher claims for initial unemployment benefits over the past two weeks have been flagged as a warning sign as the health crisis worsens in a number of states, requiring fresh restrictions on movement.
“With virus fears on the rise, jobs being lost and incomes squeezed, we feel the recovery could be much bumpier than markets seemingly do, and think we are in for some data disappointment over the next couple of months,” James Knightley, chief international economist at ING, said in a recent note to clients.
Economists surveyed by Refinitiv predict that the US economy added nearly 1.4 million jobs last month. Those gains, while solid, would mark a pullback compared to the 4.8 million increase from June.
Signs of economic weakness should add pressure on Congress to come to terms on its next stimulus package. This week is crunch time ahead of lawmakers’ summer recess.
A key benefit — an extra $600 per week in assistance for jobless Americans — expired last week. Whether to renew or reduce the benefits remains a major point of contention.
Time is of the essence. Without a stopgap measure, Americans could see a decline in income of $18 billion per week, according to Bank of America economists Michelle Meyer and Stephen Juneau. That would weigh on the spending that powers roughly two-thirds of the US economy.
Meyer and Juneau think that lawmakers can strike an agreement early this month. They expect the price tag to come in above the $1.1 trillion bill introduced by Senate Republicans, but well short of the $3.4 trillion legislation approved by House Democrats.