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Illustration: Aïda Amer/Axios

America is facing its worst rate of new coronavirus infections — and widespread sickness is expected to be compounded by economic pain from the necessary lockdown measures, much like we saw earlier this year.

Why it matters: What's different now is the lack of near-term hope for stimulus as the country tries to control the virus — at a time when economists say it's critical to mitigate fallout for the unemployed, businesses and municipalities.

  • The key will be whether "policymakers in Congress can extend the income bridge" and prevent "a second-round negative impact on the economy from the deterioration in state and local budgets," economists at Brean Capital said in a client note.

The big questions: If and when Congress will make progress on a deal. And what the Fed can do — or will do — on its own to provide economic support.

  • Meanwhile, the Federal Reserve and Congress have been pointing fingers at one another to step in.

On one side: Fed chair Jerome Powell has for months hinted at Congress in public comments — noting that an economic recovery could stall without additional fiscal support.

  • He's claimed over and over the Fed has "lending not spending powers," meaning it can't dole out aid in the form of cash or grants — what's most needed for struggling entities — the way Congress can.

On the other side: Democrats have been advocating for the Fed to extend its emergency relief programs set to expire next month — a fight that could come to a head in coming weeks.

  • Democrats "are eyeing the programs as a backup option if they can’t strike a deal to aid states and localities," the New York Times reported last week.

Driving the news: Two more states put partial lockdowns in place over the weekend through early December.

  • Michigan and Washington State said they will ban indoor dining and shut down some entertainment venues.
  • In Michigan, high schools and colleges are ordered to move online, while people are mandated work from home where possible.

Between the lines: So far, the lockdown measures aren’t as stringent as earlier this year. But they will curb economic activity.

  • "This bodes badly for businesses as they are unlikely to have the same fiscal support they received over the summer as Congress and the White House remain at an impasse on stimulus negotiations," Joseph Song, senior U.S. economist at Bank of America, wrote in a note on Friday.
  • "More businesses will be at risk of permanently going out of business, which would dampen labor demand and potentially spur new rounds of layoffs," Song said.

What to watch: Powell did acknowledge that along with Congress, the Fed will "likely need to do more," during a virtual panel with Europe and England's central bank chiefs last week.

  • The Fed could announce more policy responses at its meeting in December or possibly before, "with COVID-19 intensifying and fiscal stimulus caught in the Bermuda triangle of a partisan, lame duck Congress," Standard Chartered Bank's Steve Englander predicted in a note on Friday.
  • Englander expects the Fed to increase the pace of bond buying, which Powell alluded to at the policy meeting earlier this month. The Fed could also "add targeted measures to encourage credit provision to struggling businesses, limited to loans on good collateral."

But, but, but: Englander doesn't see these "measures as substitutes for fiscal policy, but somewhat effective measures are preferable to no measures" for the Fed.

Go deeper

Janet Yellen plays down debt, tax hike concerns in confirmation hearing

Treasury Secretary nominee Janet Yellen at an event in December. Photo: Alex Wong via Getty Images

Janet Yellen, Biden's pick to lead the Treasury Department, pushed back against two key concerns from Republican senators at her confirmation hearing on Tuesday: the country's debt and the incoming administration's plans to eventually raise taxes.

Driving the news: Yellen — who's expected to win confirmation — said spending big now will prevent the U.S. from having to dig out of a deeper hole later. She also said the Biden administration's priority right now is coronavirus relief, not raising taxes.

Austria approves COVID vaccine mandate for adults

A vaccination center installed at the Barbara Chapel of St Stephen's Cathedral in Vienna, Austria. Photo: Alex Halada/AFP via Getty Images

Austria's lower house of parliament voted on Thursday in favor of making COVID-19 vaccinations compulsory for most adults from next month.

Why it matters: The bill is expected to soon pass the upper house and be signed by President Alexander Van der Bellen in order for the law to take effect Feb. 1, per Reuters. It'd make Austria the first EU nation to impose such a sweeping mandate.

Hope King, author of Closer
Updated 6 hours ago - Economy & Business

Peloton pumps its brakes

Data: FactSet; Chart: Axios Visuals

Peloton’s popularity is falling as swiftly as it shot up.

Why it matters: Not all pandemic habits stick around. Peloton's trajectory over the past two years exemplifies how challenging it's been for companies to gauge shifts in consumer demand — particularly in sectors heavily altered by the pandemic.