JPMorgan sees Biden's stimulus cutting unemployment to less than 5% by year end

JPMorgan sees Biden's stimulus cutting unemployment to less than 5% by year end
Lower-wage workers have seen devastating job losses.Justin Sullivan/Getty Images
  • David Kelly, chief global strategist at JPMorgan Funds, wrote that President-elect Biden's new stimulus could curb unemployment.
  • A simulation of the plan found that unemployment could dip below 5% by the end of the year, Kelly wrote in a research note.
  • Down from a pandemic peak of 14.7%, December's unemployment rate was 6.7%, with 10 million Americans out of work.

President-elect Joe Biden's ambitious $1.9 trillion stimulus bill could help cut unemployment to nearly a third of its pandemic peak.

In his note on the week ahead, David Kelly, chief global strategist at JPMorgan Funds, wrote about how "conservative simulation of the impact of the plan" played out. That simulation assumes that the plan's final cost is $1.5 trillion, and that $1.2 trillion of it will be dispensed between now and the end of September.

"In this simulation, the Biden rescue plan could boost nominal GDP growth to 11.4% year-over-year by the end of this year - most of which would come in the form of stronger real GDP growth, although it would likely also result in higher prices, as hyped-up demand confronted a limited supply of services," Kelly wrote. "This could push consumption deflator inflation above the Fed's 2% target and cut the unemployment rate to below 5% by the end of the year."
Advertisement
In December 2020, the unemployment rate was 6.7%. December also saw a surprise decline of 140,000 jobs on nonfarm payrolls, with 10 million Americans still unemployed. That unemployment rate is still just a percentage of the pandemic's peak of 14.7%.

Read more: One measure of unemployment suggests Biden's $1.9 trillion stimulus plan could do more harm than good, says a top Wall Street strategist

An administration focused on tackling unemployment

In her Tuesday confirmation hearing, Treasury Secretary nominee Janet Yellen stressed the importance of helping small businesses and the unemployed. She said the pandemic has been "particularly brutal in its impact on minorities and on women."
Advertisement

The December job report showed how devastating job losses were for the most vulnerable in the workforce. Workers who can't work from home and lower-wage workers saw huge hits. In particular, restaurants shed 372,000 jobs. It's part of America's K-shaped recovery, where higher-income Americans have seen jobs and incomes grow and lower-income workers have experienced the opposite.

All of the jobs lost in December were women's jobs, according to an analysis by the National Women's Law Center.
Black and Latina women were overrepresented in those losses; in December, 154,000 Black women left the labor force - the largest one-month decline since April. According to the NWLC analysis, 8.4% of Black women and 9.1% of Latinas are unemployed. C. Nicole Mason, the president and CEO of the Institute for Women's Policy Research (IWPR), told Insider that women have lost more than 13 million jobs since the start of the pandemic. Many of them are women of color.
Advertisement

"When we think about recovery, it's really going to be important that we center through those who have been most impacted," Mason said. She added:

"I'm really optimistic about the administration and their approach to handling not only COVID-19 and the pandemic and getting it under control, but also economic recovery and relief for workers and families."

{{}}