It’s actually possible for the freight economy, which has been stuck in recession for 18 months, to get worse even though the economy produced robust 4.9% growth in the third quarter, according to Danielle DiMartino Booth.
The QI Research CEO said the firehose of federal stimulus that has lasted three years is finally coming to an end, which will reduce purchasing power for millions of consumers. Her comments came Thursday during the second annual F3: Future of Freight Festival in Chattanooga, Tennessee.
Most people were familiar with pandemic relief from the CARES Act, the Paycheck Protection Program, extra child care credits, and moratoriums on student loan payments and rental evictions that collectively injected $1.2 trillion into the economy. Less known is the employee retention credit, which only started to peter out last quarter. In July alone, it pumped $30 billion to businesses.
The employee retention credit is a refundable tax credit designed to encourage employers to keep workers on their payroll that was extended when President Joe Biden took office. The credit is 50% of up to $10,000 in wages paid by an employer whose business is fully or partially suspended because of COVID-19 or whose gross receipts decline by more than 50%.
DiMartino said it was a boon for many small businesses that were able to monetize the value of their enterprise for the first time. Owners had more cash to spend, which supported housing sales and other purchases.
The program even expanded to include startup companies that grew out of the pandemic, which turned into an invitation for massive fraud, she said. Many people acted as middle marketers finding businesses that were unaware of the credit, getting them to file and taking a percentage fee in return.
Meanwhile, the consumer is not as healthy as many news reports suggest, according to DiMartino Booth.
“What we’re seeing in household finance is absolutely frightening. The credit card delinquencies, the auto delinquencies. I see the defaults, people scrambling to take equity out of their homes and monetize all of that housing bubble. We have surpassed the historic highs that we’ve seen in consumer delinquencies,” she said.
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