There is little doubt that many people across the country have benefitted from the economic stimulus programs that the federal government has put in place following the onset of the COVID-19 pandemic more than 15 months ago. So many people were helped that the poverty rate across the country actually dropped last year, at a time when millions had lost their jobs because of the pandemic. Economists have said that the federal government’s response has ensured that the country will emerge from the pandemic in better financial shape than any other country in the world.
But that resiliency is about to be tested, as economic stimulus programs dry up and additional benefits for unemployed workers stop in state after state across the country. How consumers will manage on their own as the pandemic appears to be winding down will have a huge impact on the overall economy going forward.
Credit card spending has begun to increase as individuals across the country start shopping, dining out, and going on vacations again. Even compared with the period before the pandemic started, consumer spending is up 20% right now. Companies across the country are finding it more difficult to find qualified job candidates and have taken to offering additional bonuses and incentives to attract applicants. Even wages are on the rise across the country.
CAN CONSUMERS AFFORD TO PAY THEIR BILLS?
The key — for consumers, at least — will be can they manage all of this increase spending? The economy rolls in cycles, and we are at the stage now where consumers start spending more and accumulating more debt. After they accumulate more debt, they then usually have difficulties paying it off, and the economy slows and heads toward a recession.
There is no doubt that the United States is in the middle of an economy that is set to explode. Economists are predicting growth of at least 10% during the second quarter of 2021, three times higher than what is normally considered robust. But how long can the economy keep humming at such a high rate?
The first test is happening now, as 12 states are ending the additional unemployment benefits that were being paid to individuals who were out of work during the pandemic. Not receiving an extra $300 per week will likely result in more people looking for work.
The country deserves to celebrate the end of the pandemic and it seems as though consumers are doing their part to show how happy they are. Time will tell if they will be able to pay the bill when it comes due.
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