Another coronavirus stimulus check: Are these the deciding factors?

Published on

Talks of a second coronavirus stimulus package is one of the most discussed topics nowadays. Though it is almost certain there will be another stimulus round, whether or not it will include stimulus checks is something that many want an answer to. President Donald Trump is in support of another round of coronavirus stimulus checks, but many believe there is no need of it. Broadly, there are three factors that may determine the likelihood of another round of coronavirus stimulus checks.

Get Our Activist Investing Case Study!

Get The Full Activist Investing Study In PDF

Q1 2020 hedge fund letters, conferences and more

Another coronavirus stimulus check: June’s jobs report crucial

The first factor is June’s jobs report. Last month’s unemployment report showed an addition of 2.5 million jobs. If June’s report card also shows an improvement in the job scenario, it would mean positive signs of economic recovery. In such a case, the officials would focus more on back-to-work benefits.

After the release of the unemployment data last month, many Republicans negated the need of another stimulus. “It takes a lot of the wind out of the sails of any phase 4 — we don't need it now,” said Stephen Moore, a White House economic adviser. “There's no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report.”

On the other hand, if the June unemployment report comes in worse than expected with more people out of work than last month, then the White House would be more inclined to provide broader support, including another round of stimulus checks.

The June unemployment report will release on July 2. A recent survey by the National Federation of Independent Business found 14% of employers plan to slash their workforce after using the Paycheck Protection Program (PPP) loans. Moreover, several companies, such as Macy’s, Uber, GE and more have already revealed plans to lay off thousands of workers.

Spike in coronavirus cases

Another crucial factor that would help determine the next stimulus checks is the resurgence of coronavirus cases. With states slowly starting to re-open, there has been an uptick in the number of coronavirus cases. The new cases would be bad for businesses, as well as the consumer demand. Consumer demand is already down when compared to pre-coronavirus levels.

As per a New York Times database, 29 states are currently witnessing a rise in coronavirus cases. A few states, such as Texas, Arizona, and Florida, have already put their reopening plans on hold.

If more states suspend their reopening plans, or implement a lockdown again, then the government would have to come up with another round of coronavirus stimulus checks to help cash-strapped individuals.

Several politicians are not supporting stimulus checks at the moment because they believe the economy is improving and the coronavirus is losing steam. However, if the cases spike, then these officials would have to reconsider their belief about the need of stimulus checks.

Drop in Trump’s popularity

One more factor that could play a crucial role in determining another round of stimulus checks is the Poll Numbers. The majority of Americans are in favor of another round of coronavirus stimulus checks. With elections just a few months away, Trump could use stimulus checks as a tool to woo voters.

If the recent polls are anything to go by, then Trump, in fact, needs something extraordinary to score a win over Joe Biden. Most polls show Biden leading Trump, including in historically Republican states like Arizona, Georgia and Texas. As per Times/Siena polls, Biden’s lead has grown from 2% in October to 9%.

Though voters don’t approve of Trump in most departments, one department where Trump still enjoys voters’ confidence is the economy. Trump’s approval rating is more on the economy than the disapproval rating. Thus, Trump will want to exploit this factor to up his re-election chances.

Stimulus checks are regarded as one of the best ways to give a boost to the economy. Trump is already in favor of stimulus checks, but after realizing that it could be his only chance for re-election, he could leave no stones unturned to get approval for it.  So, we can say that the chances of stimulus checks would rise, if Trump’s poll numbers continue to go down.

Trump in support, but what about others?

In a recent interview with Scripps' Joe St George, Trump reiterated support for another round of coronavirus stimulus checks, saying “We are, we are,” adding it would be very “dramatic.” However, many other high-profile officials may not support another round of direct payments.

U.S. Treasury Secretary Steve Mnuchin recently indicated that the next stimulus would be more focused on jobs. “So whatever we do, it’ll be much more targeted, much more focused on jobs, bringing back jobs and making sure we take care of our kids," Mnuchin said at a Republican event last week.

Kudlow On Another coronavirus stimulus check

Speaking to Fox Business this month, White House adviser Larry Kudlow suggested that the focus now should be on more long-term economic growth incentives, such as payroll tax holidays, tax breaks for restaurants and other industries hit hard by the coronavirus outbreak. Kudlow, previously, has also talked about return-to-work benefits.

These officials may not approve of the stimulus checks now. If things (the above three factors) change, then it is very likely that there could be unanimous calls for giving stimulus checks to Americans.

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!