Potential economic 'air pocket' ahead could present opportunities

WE ARE watchful of the risk of an air pocket in the US economic recovery due to the waning support from US federal weekly unemployment stimulus cheques under the Coronavirus Aid, Relief, and Economic Security (CARES) Act that expired in July.

President Donald Trump's executive action on Aug 8 to extend federal unemployment benefits will take a few weeks to be delivered, and provides a lower amount of US$300 per week versus US$600 previously. Moreover, it is constrained by US$44 billion of federal funding which can last for only around one month.

While the potential impact of the income drop is concerning, it has yet to show clearly in economic data such as credit card spending and purchasing managers' indices (PMIs). Of note is the latest initial jobless claims figure, which climbed above one million again after two weeks of declines, although we are reluctant to read too much into one data point.