US Economy

Wall Street's Ed Yardeni: U.S. economy might not need new, big coronavirus stimulus after all

Key Points
  • Wall Street strategist Ed Yardeni said the U.S. economy may be able to improve enough this fall to render another round of large coronavirus stimulus unnecessary. 
  • "There is still enough of this government stimulus that will keep the economy growing, probably through September, October, maybe November," Yardeni told CNBC. 
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Fundamentally bullish because fundamentals will continue to improve: Yardeni

Stock strategist Ed Yardeni told CNBC on Tuesday that the U.S. economy may be able to improve enough this fall to render another round of large coronavirus stimulus unnecessary. 

Appearing on "Squawk on the Street," the president of Yardeni Research contended that remnants of earlier Washington stimulus continue to make there way through the nation's economy, which had been devastated by the pandemic. 

"I reckon that there is still enough of this government stimulus that will keep the economy growing, probably through September, October, maybe November," Yardeni said. "And hopefully along the way we'll see employment continue to pick up so the economy can grow on its own without necessarily needing another, or at least another big, stimulus package." 

Lawmakers in Washington had been negotiating another round of fiscal stimulus after many of the key provisions in the March $2.2 trillion legislation expired in late July. But Democrats and the Trump White House eventually found themselves in a stalemate, with disagreements over the size and scope of the potential relief bill. The GOP generally favors a less expansive package than Democrats.

President Donald Trump, who in early August signed a series of executive actions that partially extended some of the expired benefits, including the federal unemployment supplement to state benefits, called on Republicans last week to back "much higher numbers" for the bill. On the same day, White House chief of staff Mark Meadows also expressed optimism about reaching a deal. 

However, some people including Yardeni believe the prospects of a deal being reached before the November presidential election are looking increasingly unlikely following the death of Supreme Court Justice Ruth Bader Ginsburg and the fight between Republicans and Democrats over whether Trump or the next president should fill her seat.

In August, the U.S. unemployment rate was 8.4%, a significant improvement from its pandemic peak of 14.7% in April. And after those labor market gains, Yardeni said, he remains optimistic about the pace of the economic recovery. 

"I think as the economy starts to improve, we'll find that we're going to be surprised how quickly things — I don't know if they're going to come back to normal — but I think how quickly things do improve. Not just for those who are doing well now, but for those who have been particularly hard hit by all this," he said. 

Yardeni, whose economic and market insights are closely followed by some investors, pointed to the personal savings rates as one reason for his positive view on the recovery. The rate hit a record high of 33% in April, and while it has since come down to nearly 18% in July, it remains higher than any other point going back to January 1959, according to data from the Bureau of Economic Analysis

"It was $1 trillion before this all hit, I think it was around January, and then by April, it soared to $6 trillion at an annual rate because people who were making money couldn't go out and spend it the way they had, and then people who were getting checks from the government, even they couldn't spend it all, so there was this big pile up of cash," Yardeni said. "By July, we were down to $3 trillion." 

There is widespread agreement that the government relief efforts — the $1,200 stimulus checks and the $600 weekly federal unemployment supplement — have been vital to increasing the savings rate and helping the economy recover, but some are raising concerns about how long it can last

"There's certainly a risk though that those who are unemployed appear to have saved some of those benefits and they'll now spend them," Federal Reserve Chairman Jerome Powell said last week. "As the months pass, if there's no follow-up on that, if there isn't additional support and there isn't a job for some of those people in the industries where it's going to be very hard to find new work, then it's going to show up in economic activity." 

— CNBC's Jesse Pound contributed to this story.  

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More fiscal support likely to be needed: Fed's Powell