The last few days have marked the ending of a number of federal support programs aimed at helping Americans get through the pandemic. How this will all play out is anyone’s guess.
We have seen the end of the federal moratorium on evictions. Those who face eviction will have a more difficult time finding new housing as the cost of renting a house or apartment has risen sharply across the U.S. The Wall Street Journal reports that real estate data company Yardi Matrix found apartment rents increased by 8.3% year to date through July. Rent for houses jumped by 13% for the same time period.
Just recently we saw the nationwide ending of enhanced unemployment benefits from the federal government, though some states had cut those extra benefits earlier in the year in order to jump-start their labor markets. However, the New York Times reported on a study that found states that ended the extra benefits early compared to those that kept all or some of the benefits found only a small increase in the amount of new hirings and slower recoveries since residents had less money available to spend.
I’m not here to argue whether these protections and programs should have continued longer. That’s a topic for a different type of publication.
What I am curious about, though, is what effect the end of these programs will have on states’ economies, the U.S. economy and, specifically, the U.S. hotel industry.
As I referred to earlier, the end of the enhanced federal unemployment benefits really didn’t do much to push the unemployed back to work in the states that cut the program early. Having a loss of income paired with fear of eviction or higher rents might spur more people to apply for the many, many available jobs, but it’s not a cure-all. Though there was certainly overlap, the Venn diagram of people now facing higher rents or eviction is not a perfect circle with people collecting the enhanced benefits.
Also, keep in mind that many of the people who have not reentered the workplace have other considerations besides just finances. There is, after all, still a pandemic going on.
CBS News reported Goldman Sachs analysts estimate the ending of the benefits might lead to job growth of 1.5 million new positions through the end of the year, but health concerns weigh heavy on people's minds.
"Our findings also suggest that many workers that have left the labor force since the start of the pandemic did so for non-financial reasons such as concern about COVID, and may be slow to return to the labor force even after [unemployment] benefits end," the analysts for Goldman Sachs wrote.
Let’s look at the situation from another perspective. The hotel industry, and the overall economy, benefited over the last year and a half when people had additional funds provided to them through the enhanced benefits and/or several rounds of stimulus checks. That extra cash in consumers’ hands helped speed along the economic recovery and buoyed the hotel industry through two summers filled with leisure travel.
Those enhanced benefits are now gone, and I don’t know about you, but I’m not expecting another stimulus check any time soon.
Pair that with people — many of whom have worked partway or entirely through the pandemic — who now face evictions or higher rents, which could then result in eviction. The uncertainty they face likely means they won’t be spending on anything beyond the necessities.
Maybe it won’t play out this way, but I wouldn’t be surprised if we saw a not insignificant drop in consumer spending over the next several weeks and/or months. That could slow the overall recovery, and that would add to the expected drop in leisure demand over the autumn and winter months for U.S. hotels.
We won’t know, of course, until we get through the remainder of the year. We have collectively experienced a number of unexpected events during the pandemic, and not everything turned out as we previously thought they would.
As always, here’s hoping for the best.
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