The decline in UI is affecting discretionary spending: Looking at the data by sector, the UI recipients cut back the most on clothing and home improvement spending and the least on gas and restaurants/bars (Chart 1). This compares to small increases in the growth rate of spending for the non-ACH UI recipient across these categories with the exception of home improvement.
On the fiscal side, the expiration without replacement of extended unemployment benefits may already be hurting economic and market fundamentals. The importance of this program to the recovery can’t be overstated. Quoting our US economists, “absent government support disposable income would have fallen the most in history; with that support it has risen the most in history.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
