WASHINGTON (BLOOMBERG) - US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have agreed to work to avoid a government shutdown right before the election, and not let the stalemate over coronavirus-relief legislation hold up a vital stopgap spending bill.

Their informal agreement was made in a Tuesday (Sept 1) phone call, according to people familiar with the discussion.

While clearing the way for the government to keep running at the Oct 1 start of the fiscal year, it doesn't resolve the standoff over a new stimulus or whether some relief measures might be included.

Republicans and Democrats in Congress, seeking to avert a politically damaging government shutdown just before the Nov 3 election, had been planning a bill to extend funding at least until mid-November. There was a risk, however, that either side would try to leverage the need to pass such a stopgap to achieve their goals for an economic stimulus.

The agreement was reported earlier Thursday by the Associated Press.

"House Democrats are for a clean continuing resolution," said Drew Hammill, Pelosi's spokesman, referring to the temporary funding measure.

Congressional Democrats and the Trump administration have been at an impasse over stimulus since talks broke off on Aug. 7. The sides are about US$1 trillion (S$1.36 trillion) apart, with Democrats pushing for US$915 billion in aid to states and localities and insisting on US$600 per week federal supplemental unemployment benefits.

During the Tuesday call, Mnuchin and Pelosi weren't able to bridge that gap - even after the Treasury chief had signalled fiscal aid was urgent for parts of the US economy.

Pelosi later pointed out that Democrats had already pared their earlier US$3.4 trillion demand down to US$2.2 trillion.

STIMULUS PESSIMISM

The continuing impasse has led to pessimism this week from Republicans.

"I don't know if there will be another package in the next few weeks or not," Senate Majority Leader Mitch McConnell said at an event at a hospital in his home state of Kentucky on Wednesday. He said any embrace of bipartisanship in the Capitol has "descended" as the fall elections near.

Senate Republicans are discussing holding a vote next week on a roughly US$500 billion package, if they can get most of their lawmakers on board with it.

McConnell's Democratic counterpart, Minority Leader Chuck Schumer, in a letter to colleagues Thursday said Republicans weren't taking the economy's needs seriously in moving toward such a vote.

"Republicans may call their proposal 'skinny,' but it would be more appropriate to call it 'emaciated.' Their proposal appears to be completely inadequate and, by every measure, fails to meet the needs of the American people," Schumer said.

UNEMPLOYMENT PAIN

He referenced continuing high unemployment, something seen in data released Thursday. The number of initial claims for unemployment insurance in state programs held above 800,000 in the latest week - unadjusted for seasonal variations - almost quadruple the pre-coronavirus trend. Friday's August employment report is forecast to show a second straight slowdown in job gains.

As for the Pelosi-Mnuchin accord, it could help to limit any financial-market turmoil spurred by worries over a shutdown twinned with the absence of stimulus. A run-up in equities to record highs in recent weeks has reduced pressure that might otherwise have been brought to bear on politicians for a deal on virus relief. Though a 3.5 per cent tumble on Thursday shows the narrative could shift in time.

Back in late 2018, a deadlock between Trump and Congress over border wall funding led to the longest shutdown in history, lasting 35 days.

"We do believe we'll be able to get funding to avoid a shutdown," White House press secretary Kayleigh McEnany said on Thursday.