Economic Growth Rate Slowed in 3rd Quarter to 2 Percent as Delta Variant Derailed Recovery

Economic Growth Rate Slowed in 3rd Quarter to 2 Percent as Delta Variant Derailed Recovery

October 28, 2021

ABI Bankruptcy Brief

Economic Growth Rate Slowed in 3rd Quarter to 2 Percent as Delta Variant Derailed Recovery​​​​​​

Economic growth slowed sharply between July and September as the emergence of the COVID-19 delta variant derailed the recovery from the coronavirus recession, according to data released today by the Commerce Department, The Hill reported. U.S. gross domestic product (GDP) grew at an annualized rate of 2 percent in the third quarter, according to the Census Bureau’s first estimate. The economy grew at a 6.7 percent yearly pace in the second quarter of 2021, marking a sharp slowdown as the delta surge began. “The increase in third quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country,” the Census Bureau explained. “Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased.” The beginning of the delta surge in late July upended an economy that was adding roughly 1 million jobs per month. As cases surged, schools either delayed or canceled in-person education, consumer activity in hard-hit sectors declined, and millions of Americans were unable to return to the labor market. ​​

Commentary: The U.S. Should Rethink Public Service Loan Forgiveness*​​​​​​

The Joe Biden administration has announced an overhaul of the government’s public service loan-forgiveness program, which would allow tens of thousands who work for the government or nonprofits to discharge their loans ahead of schedule. The new policy aims to address flaws that have prevented borrowers from receiving the relief they were originally promised. The administration means well, but wide-scale debt-forgiveness is the wrong way to encourage students to pursue careers in public service, according to a Bloomberg News commentary. Under the existing program, which Congress created in 2007, student loan borrowers working for the government and in other nonprofit jobs can have their debts canceled if they’ve made monthly payments for at least 10 years. More than 1 million workers are potentially eligible, but their chances of realizing its full benefits are slim. Out of roughly 725,000 applicants since 2017, only 2% have had their loans discharged. Some had made the required number of payments but were nonetheless denied because of administrative errors. Others have been penalized for enrolling in federal loan programs that aren’t covered, or for making payments a few days late. Earlier this month, the Department of Education took steps to fix the system. Borrowers denied for having the wrong types of loans or because of late payments or other technicalities will now qualify. The government will also allow members of the military, who can suspend their student loan payments while on active duty, to count those months as credit toward full debt forgiveness. Starting next year, service members and federal employees will be automatically enrolled in PSLF instead of having to apply. Under the new rules, as many as 50,000 public service workers could receive immediate relief, wiping out $4.5 billion in student loan debt. All of this will help redeem the PSLF’s original commitment to public-sector workers. The trouble is that the original commitment was not well-judged. The government ought to revisit the basic principles and narrow the scope of the program, according to the commentary.​​

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

CPEX21 Kicks Off Next Week! Immerse Yourself in the Future of Consumer Bankruptcy Practice, Student Loans, Mortgage Mediation and More!​​​​​​

Be sure to register today for ABI’s Consumer Practice Extravaganza (CPEX21), being held Nov. 1-12, during which leading practitioners will be examining key issues across the consumer bankruptcy landscape! Held on a state-of-the-art virtual platform, CPEX will feature five broad session tracks to ensure that there is something for every level of consumer practitioner, with deep dives into the future of bankruptcy and practice management, as well as spotlights on key consumer issues, bankruptcy 101 and ethics. Attendees can select sessions from any track, and all sessions will conveniently remain available to attendees for 30 days after the conclusion of the conference. CPEX will also feature a range of special “demo days” showcasing technology and money-saving tools especially designed for consumer practitioners, circuit-specific breakout sessions and plenaries, and networking with members of the consumer bench and bar. All for the registration price of only $100! Register here.

U.S. Jobless Claims Drop to Pandemic Low of 281,000​​​​​​

The number of Americans applying for unemployment benefits fell to a pandemic low last week as the job market continues to recover from last year’s coronavirus recession, the Associated Press reported. Jobless claims dropped by 10,000 to 281,000, the lowest since mid-March 2020, the Labor Department said Thursday. Since topping 900,000 in early January, weekly applications have steadily dropped, moving ever closer to pre-pandemic levels just above 200,000. The four-week average of claims, which smooths out week-to-week gyrations, fell by nearly 21,000 to 299,250, also a pandemic low. In all, 2.2 million people were collecting unemployment checks the week of Oct. 16, down from 7.7 million a year earlier. The pandemic slammed the economy in the spring of 2020. In March and April last year, employers slashed more than 22 million jobs as businesses closed or reduced hours in response to lockdowns and consumers staying home as a health precaution.​​

Exacerbated by the Pandemic, Child Care Crisis Hampers Economy​​​​​​

The pandemic has made clear what many experts had long warned: The absence of reliable and affordable child care limits which jobs people can accept, makes it harder to climb the corporate ladder and ultimately restricts the ability of the broader economy to grow, according to an Associated Press analysis. “Early learning is no longer seen as just a women’s issue or a children’s issue. It’s really seen as an economic issue. It’s about workforce participation,” said Mario Cardona, policy chief for Child Care Aware of America. “It’s about employers who don’t have to worry about whether they’ll be able to rely upon employees.” Child Care Aware estimates 9% of licensed child care programs have permanently closed since the pandemic began, based on its tally of nearly 16,000 shuttered centers and in-home daycare centers in 37 states between December 2019 and March 2021. The national crisis has forced many people — mostly women — to leave their jobs, reshaping the child care crisis as not just a problem for parents of young children, but also anyone who depends on them. It has contributed to a labor shortage, which in turn has hurt businesses and made it more difficult for customers to access goods and services. “The decisions we make about the availability of child care today will shape the U.S. macroeconomy for decades to come by influencing who returns to work, what types of jobs parents take and the career path they are able to follow,” said Betsey Stevenson, an economist at the University of Michigan. President Joe Biden has pledged an unprecedented burst of federal spending in hopes of fixing the child care market. At a recent town hall in Baltimore, he assured parents they would “not have to pay more than 7% of your income for child care.” Federal money would go directly to care centers to cover costs in excess of the 7% cap. This means the median U.S. family earning $86,372 would pay $6,046 annually for child care.​​

Analysis: Mandatory Arbitration Cases Have Soared During the Pandemic​​​​​​

U.S. employers relied heavily on arbitration in the first months of the pandemic, pushing a record number of complaints involving discrimination, harassment, wage theft and other grievances through a closed-door system largely weighted against consumers and workers, according to a report being released this week, the Washington Post reported. Companies closed nearly 14,000 arbitration cases in 2020, according to the American Association for Justice, the industry group for trial lawyers. That’s 17 percent more filings year over year, in a system with no path for appeal. And no company engaged in it more frequently than Family Dollar: The discount chain and its parent, Dollar Tree, arbitrated 1,135 cases in 2020 — nearly a third of all U.S. cases — compared with three the year before. Most nonunion U.S. companies require arbitration, leaving 60 million workers without legal recourse, according to a 2018 report from the Economic Policy Institute, a left-leaning think tank. Critics say the system, in which cases are decided by private arbitrators, keeps employment disputes out of the public eye and fails to hold corporations accountable. But proponents say it saves money and time, making it an efficient alternative to the court system, where lawsuits can take months, even years, to play out. ​​

Biden Pitches $1.85 Trillion Framework to Ease Passage of Parallel Infrastructure Bill​​​​​​

The White House released a $1.85 trillion social policy and climate framework, putting out a still-developing product that top House Democrats hope will be enough to persuade progressives to drop their objections to a parallel, roughly $1 trillion infrastructure bill that leaders want to pass later today, the Wall Street Journal reported. President Biden met with House Democrats in the morning to pitch lawmakers on the framework, a far-slimmer piece of legislation than the $3.5 trillion the party originally had outlined. Democrats have been rushing to complete negotiations on the bill so that they also can move forward with the public-works legislation, which passed the Senate over the summer but has languished in the House. The White House framework released today called for funding for child care subsidies, universal prekindergarten, tax breaks for families, in-home care for elderly and disabled Americans, and tax credits aimed at combating climate change. But several party priorities were absent, including a national paid-leave program, while the fate of others, including a push to allow the government to negotiate drug prices, remained uncertain. (Subscription required.) ​​

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New on ABI’s Bankruptcy Blog Exchange: CFPB’s New Leader Is Putting Big Tech on Notice

Consumer Financial Protection Bureau Director Rohit Chopra is laying the groundwork for regulatory oversight of the largest technology companies as the agency crafts rules around consumer choice and control over financial data, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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