Week ahead: Election spending, economic headwinds
With the 2020 election less than one month away, credit union priorities are unlikely to get much attention in Congress — at least until after voting ends.
Members of the Senate Judiciary Committee have scheduled confirmation hearings for Supreme Court nominee Amy Coney Barrett beginning next week, but both chambers’ legislative calendars have no other scheduled action until after the November election.
Industry groups continue to press for more coronavirus relief but are unlikely to move anything forward until after the election and, presumably, Barrett’s confirmation.
“I’m not sure the nomination has done a lot to fundamentally change the dynamics that have kept Congress from coming together on COVID legislation,” said Ryan Donovan, chief advocacy officer at the Credit Union National Association. “It probably hasn’t helped, but a COVID deal was hard to see before the nomination and it hasn’t gotten any easier since the nomination.”
CUNA this week is also set to continue announcing spending for House candidates in a variety of races, following announcements in the last two weeks that the Credit Union Legislative Action Council has begun advertising for candidates in several House and Senate races. Trey Hawkins, VP of political affairs at the trade group, noted that the ads are “a stark contrast to a lot of the negative advertising [in] a lot of competitive races around the country." Instead, they are focusing on positive messaging regarding how these candidates are helping their communities, serving constituents and supporting credit unions.
Federal jobs data last week showed unemployment fell 0.5 of a percentage point to 7.9%, but Curt Long, chief economist at the National Association of Federally-Insured Credit Unions, said the report “was a troubling one, as job growth fell below expectations and thousands left the workforce.”
Things may not get much better before 2021, added Long, noting that with several major employers announcing layoffs in recent weeks, “it seems clear that the fourth quarter will see its fair share of job separations, while hiring rates will be too weak to absorb the influx. Without another sizable spending package from Congress, continued recovery in the labor market looks doubtful, which sets up a long slog to get back to a pre-crisis economy.”
Any new stimulus package from Congress could also affect credit union balance sheets, since a significant amount of this year’s deposit growth came as a result of economic impact payments. Still, new data from CUNA shows signs that things are improving.
Mike Schenk, chief economist at the trade group, said Monday morning that new data reveals just a 0.3% increase in savings balances in August, the slowest rate of the year and a major change from the 1.6% lift recorded in July. Should that leveling off continue, that’s likely to have a positive impact on the industry’s overall capital ratio.
However, loan growth in August stood at just 0.22%, the slowest rate since February, with mortgages and used auto loans making gains while ”all other key areas of the portfolio” declined, he said.
NAFCU noted that vehicle sales continued to rebound in August, risings 7.2% month-over-month to 16.3 million units, about 4% below levels seen one year prior.
Long suggested that auto sales are likely to slow again in the fourth quarter due to “fading momentum in the labor market and a potential surge in the virus.”