December 4, 2012
LIA Monthly Economic Report - The Looming "Fiscal Cliff"
By: Dr. Pearl M. Kamer, LIA Chief Economist
The U.S. labor market, consumer and housing sectors are continuing to show signs of recovery. However, the looming "fiscal cliff" is increasing the level of uncertainty concerning future economic activity and many businesses have put investment and hiring plans on hold until some of this uncertainty is resolved.
U.S. employers created 171,000 payroll jobs in October, indicating that the pace of job growth has accelerated in recent months. This pace remains too slow to materially reduce U.S. unemployment rates. More than 40% of the nearly five million Americans who currently receive extended unemployment insurance benefits stand to lose those benefits if the federally-backed emergency unemployment programs adopted by Congress in 2008 expire as scheduled at the end of this year. About 2.1 million Americans receive payments under these programs. In some states workers have been able to receive up to 99 weeks of benefits. It is estimated that the direct hit to consumer spending caused by this loss of benefits would be relatively modest, about $60 billion through 2013. Nevertheless, this could reduce U.S. GDP growth by several tenths of a percentage point next year.
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