The sharp decline in the nation’s unemployment rate to 8.4% in August should motivate Washington to break the stalemate over additional coronavirus stimulus to keep the economic recovery going, a former top Obama economic advisor told CNBC on Friday.
“Part of why we saw this good [jobs] number in August was the extraordinary stimulus in the months leading up to it,” said Jason Furman, who served as chairman of the Council of Economic Advisors during Barack Obama’s presidency. If a deal between Democrats and Republicans on a new pandemic relief package were to remain elusive, an important tailwind to the economy “will not be there in September and October,” he added.
One of the sticking points on a new agreement — which would give the economy another boost after the record $2.2 trillion coronavirus aid package in March — has been how to reinstate all or part of the federal $600 per week boost to state unemployment benefits, which expired in July.
“At an 8.4% unemployment rate the case for compromising on the $600 per week unemployment insurance is much stronger,” Furman, currently a professor with Harvard’s Kennedy School of Government, said in a “Squawk Box” interview. “That might have made sense when the unemployment rate was 15%. Coming down to something like President Trump’s number of $400 a week … I’d like to see Democrats say, ‘At 8.4% unemployment, we can do that.'”
A $500 billion Senate Republican stimulus bill, set for release next week, would allow for extra federal jobless benefits at $300 per week to $400 per week. Democrats have pushed to reinstate the full $600 per week.
With Washington deadlocked, the Trump administration last month enacted the Lost Wages Assistance program to provide an extra $300 per week in federally funded benefits. States could opt to kick in another $100. At least 41 states have been approved to offer the subsidy. Funding for the program is expected to last about four or five weeks.
Democrats, who pushed a more than $3 trillion package through the House in May, have called for Republicans to increase their stimulus offer to $2.2 trillion. The White House has been trying to bring the two sides closer together.
In the meantime, the Trump administration and Congress have agreed to pass a bill to avoid a government shutdown without tying funding to separate measures such as coronavirus relief, Vice President Mike Pence told CNBC on Friday.
