Outgoing US President Donald Trump has urged his supporters to protest. Photo / AP
Outgoing US President Donald Trump has urged his supporters to protest. Photo / AP
Threats of violent Washington protests, critical Senate elections and a stalling US jobs recovery threaten an "unsettling" start to 2021 for the world's biggest economy, experts have warned.
Outgoing president Donald Trump has urged his supporters to the capital to demonstrate against the expected confirmation of November's election result byCongress on Jan 6. Objections by Republicans echoing Mr Trump's claims of electoral fraud will force votes in the Republican-controlled Senate and the Democrat-held House in a last-ditch bid to overturn the result.
Even though the efforts will almost certainly fail, the flashpoint comes a day after run-off elections in Georgia could give President-elect Joe Biden a surprise Senate majority. Both Democratic candidates now lead in the polls following a late surge, potentially giving Biden control of both houses and more leeway to pass laws.
The political turmoil is playing out against the backdrop of a resurgent Covid-19 and jobs figures expected to show just 80,000 jobs added in December, the weakest since a record 20.8m staff were lost in April.
James Knightley, chief US economist at ING, said: "It could be an unsettling week for financial markets. The markets have been set up for the Republicans in the Senate constraining Biden so he would not get away with wackier policies on tax and regulations.
"But if you suddenly get this 'blue wave' [in Georgia], and this big protest that turns very violent or nasty with Trump not backing down, if more senators than expected back this call that the election was rigged, and then you get an awful jobs report as well, that could be quite a nasty mix for financial markets."
President Trump's tweet on Dec 19 called for a "wild" protest in Washington while in a pre-election debate he told the 'Proud Boys' – an all-male, far-right group – to "stand back and stand by". Proud Boys have been involved in violent clashes at previous Washington protests and its leader, Enrique Tarrio, said last week that the group would be "incognito" and "spread across downtown DC in smaller teams".
Incoming President Joe Biden faces a number of major challenges. Photo / AP
Nancy Vanden Houten, lead US economist with Oxford Economics, said the protests "added an element of uncertainty".
She said: "Trump and his allies continue to find ways to prolong the process. It certainly could be inflammatory with what he puts out there, and I expect there will be some people gathering to protest on Jan 6. If something were to turn very violent it might cause some volatility in financial markets, but so far the market seems to be shrugging off this process. There's really no possibility the result will be overturned despite these last-minute shenanigans."
Tom Porcelli, US economist at Canadian bank RBC, said: "If you have unrest and it gets people to worry about the broader backdrop, then confidence falls and spending can start to slow down."
The surge in Covid infections has seen the US set new records for deaths in a single day last week with 3,740 victims on Dec 29.
The new faster-spreading variant of the virus has been identified in California, while many states have imposed fresh restrictions such as New York, which banned indoor dining last month.
Food and hospitality workers are expected to bear the brunt of the US jobs pain. Mr Knightley added: "The real downward trend is in leisure and hospitality, which will have accelerated in December as more bars and restaurants were told to close their doors in response to rising Covid cases."
The US jobless rate stands at 6.7pc with 4.9m more Americans still out of work compared to pre-pandemic February. Ms Vanden Houten said unemployment could take until 2025 to return to pre-Covid levels.
