The ‘Great American comeback’ is a lie: dismal outlook for the unemployed ahead

On Friday, Trump used a flawed unemployment report showing showing some two million jobs returned to the economy as a reason to launch his Russian-style dezinformatsiya campaign ad, “The great American comeback has begun”. Actually, A ‘misclassification error’ made the May unemployment rate look better than it is: “The special note said that if this “misclassification error” had not occurred, the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the unemployment rate would be about 16.3 percent for May.” Just to be clear, this is depression-level unemployment. Nothing to celebrate.

Then the Brookings Institute came out with its analysis Debunking the Trump Administration’s Report on the Dropping Unemployment Rate:

The Brookings Institution has issued a report debunking a report from the Department of Labor (DOL) that President Donald Trump has seized on showing a drop in the unemployment rate.

The United States added 2.5 million jobs during the month of May as businesses began to reopen. Additionally, the unemployment rate dropped to 13.3 percent from 14.7 percent in April, according to the report, a phenomenon that can be attributed to many states reopening their economies and sending people back to work, often against the advice from healthcare and policy professionals.

But the report, conducted by the Bureau of Labor Statistics (BLS), is misleading.

“BLS asserts that 20,935,000 Americans were unemployed in May, attributing the decline to employers adding 2,509,000 jobs in May as states allowed ‘a limited resumption of economic activity.’ But it’s not that simple,” Brookings notes. “The unexpected decline in the jobless rate is based on a survey of businesses and households conducted over the week of May 16th, and BLS has also reported that 29,965,415 Americans received unemployment insurance benefits in the same week.”

That means there’s “a gap of 8,980,415 people, enough to raise the May jobless rate 5.7 percentage points to 19.0 percent and much closer to economists’ expectations.”

Brookings credits BLS’s low figure in part to the Payroll Protection Program, which meant BLS “counted anyone who employers say were still being paid as employed ‘even if they were not actually at their jobs.’

“Part of it involves how the BLS treats the many millions of people now on furlough and not being paid. They are considered ‘unemployed on temporary layoff.’ But if BLS expects them to return to their old jobs, based on the survey, they do not count among the unemployed,” Brookings notes.

“Finally, part of the 9 million-person discrepancy may involve how BLS decides whether a person who is not working is still part of the labor force,” the organization continues. “If you are out of work but didn’t look for a job over the previous four weeks, or couldn’t work for family reasons such as caring for children who are no longer in school, BLS says you are out of the labor force. If you’re not in the labor force, you’re not unemployed.”

This morning the Labor Department reported Unemployment claims climbed by 1.5 million last week, despite jobs gains in May:

Workers filed another 1.5 million claims for jobless benefits last week, the Labor Department reported, suggesting that some Americans are still being pushed out of work nearly three months into the pandemic.

Additionally, nearly 706,000 people applied for benefits under the new temporary Pandemic Unemployment Assistance program created for people who are ineligible for traditional unemployment benefits. With those workers added, the number of new claims filed last week could be higher than 2.5 million, despite every state loosening stay-at-home orders and allowing businesses to reopen in recent weeks.

The latest figure indicates that the coronavirus-induced recession has forced roughly 44 million workers to seek unemployment aid in just 12 weeks. But that number likely includes duplicate applications, as some states have instructed workers to reapply if they were first found ineligible, and doesn’t include those seeking PUA benefits.

Economists suggest that the number of workers currently receiving benefits or waiting to get benefits is likely closer to more than 31 million. That number includes the workers who have filed “continued claims” — or those who are still seeking unemployment benefits for another week.

The number of Americans applying for jobless benefits has been slowly declining, but economists note that the amount of weekly jobless claims still remain at historically elevated levels.

During the 2008 financial crisis, the highest number of new weekly claims recorded was 665,000.

If Americans continue to drop off the jobless rolls at the current rate, it would take more than two years to get back to the pre-pandemic rate of unemployment, said Andrew Stettner, senior fellow at The Century Foundation.

Fed Chair Jerome H. Powell predicted a slow recovery for the U.S. economy on Wednesday, with unemployment falling to 9.3 percent by the end of this year and to 6.5 percent by the end of 2021. Federal Reserve predicts slow recovery with unemployment at 9.3 percent by end of 2020:

Fed Chair Jerome H. Powell stressed Wednesday that more aid from Congress and the central bank is likely to be needed, especially since a substantial number of Americans may never get their jobs back.

“Unemployment remains historically high,” Powell said during a news conference Wednesday. “My assumption is there will be a significant chunk … well into the millions of people, who don’t get to go back to their old job … and there may not be a job in that industry for them for some time.”

To revive the economy from the deepest recession since the Great Depression, the Fed pledged to keep interest rates at zero, most likely through 2022, and to continue its extensive bond-buying programs at the current pace for the foreseeable future. The Fed’s historic efforts, which could swell its balance sheet to $10 trillion by year’s end, are also fueling deeper inequality in the United States, many economists say.

Low interest rates have spurred enormous stock market gains and made it cheap to get a loan for a car, mortgage or business operation. But a prospective borrower generally needs to have savings and a stable job to get access to credit or invest in the market. The Fed has limited tools to use in emergency situations such as this, and they tend to buoy Wall Street far more than Main Street.

“The Fed’s response has deepened wealth inequality. They’ve produced an incredible recovery in asset prices, and most of these assets are owned by the rich and the white segment of the population,” said Mohamed A. El-Erian, chief economic adviser at Allianz. “All they can say is the alternative would have been worse.”

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The Fed’s own data shows only about half of Americans have any money invested in the stock market, and nearly 40 percent of households do not have enough cash on hand or in a bank account to cover an emergency $400 expense, leaving them especially vulnerable if they lose their jobs or their work hours are cut.

Numerous lawmakers in both parties have also expressed disappointment that the Fed still has not been able to get what is called its Main Street Lending program, aimed at small and midsize companies, up and running after two months.

Powell stopped short of recommending any specific actions by Congress. Economists across the political spectrum have called for federal aid to cash-strapped state and local governments that have already cut over half a million jobs as they try to balance their budgets as they deal with the coronavirus and widespread protests over police use of force.

But many economists are also concerned that enhanced aid for the unemployed, including an extra $600 a week in unemployment benefits, expires at the end of July, when jobs are still likely to be scarce. How to help the people left out of the rebound remains contentious in Congress.

On this score, the New York Times reports, With Jobless Benefits Set to Lapse, Congress Is at Odds Over an Extension:

Lawmakers in both parties and administration officials appear to agree that Congress should consider some form of assistance to workers as part of another round of coronavirus aid that is likely to be debated in the coming weeks. But while Democrats want to continue a supplement of $600 a week past July 31, when those benefits are set to lapse, Republicans and the White House — citing an unexpected “improvement” (see above) in jobs numbers — are resisting the move, arguing that doing so could discourage people from returning to work.

The debate reflects a broader divide between Democrats who favor enacting another broad-based round of economic stimulus aimed at helping individuals suffering financial ruin because of the pandemic and Republicans who are eyeing a narrower package that seeks to incentivize reopening the country as the key ingredient in any recovery. Some lawmakers in both parties are trying to find a middle ground, proposing a back-to-work bonus – [a “death benefit” when the pandemic is spreading unchecked] – that would reward people who returned to the work force.

In testimony on Capitol Hill this week, the top Trump administration labor official signaled that he did not believe the enhanced unemployment benefits would be necessary beyond their expiration date.

“We’ll be in a very different place in July,” the secretary of labor, Eugene Scalia, told lawmakers on Tuesday at a hearing of the Senate Finance Committee.

A day later, Steven Mnuchin, the Treasury secretary, was noncommittal, even as he warned that keeping the $600-a-week benefit could have detrimental effects.

“We knew there was issues with enhanced unemployment, when in certain cases we were paying people more not to work than work,” said Mr. Mnuchin, who agreed to the package during intense negotiations on the stimulus measure, angering many Republicanswho regarded it as too generous.

“We’re going to need to look at doing something” to continue to help workers, he said.

Republicans argued that the unexpected news on Friday that the unemployment rate had declined and employers had added 2.5 million jobs in May (see above) was evidence that the benefit was no longer needed. Congress should redirect its focus to ensuring people were headed back to work and not remaining on unemployment, they said.

So “get back to work, you takers!” And if it’s still not safe for you to return to work during a pandemic which is spreading unchecked because Americans have given up fighting the coronavirus pandemic, too bad, “you should be willing to sacrifice your life for Wall Street.” “The cure cannot be worse than the problem.”

Thanks to Republicans, it’s not looking good for American workers. Tom Garza opines at Buzzfeed News, The Real Economic Catastrophe Hasn’t Hit Yet. Just Wait For August.

More than 40 million people lost their jobs in the last few months, in the fastest and deepest economic slowdown ever recorded. More than half of all households with low incomes in the United States have experienced a loss of earnings, as have a quarter of all adults. The numbers are grim — but as bad as things look today, they’re on track to get much, much worse.

The US economy right now is like a jumbo jet that’s in a steady glide after both its engines flamed out. In about six weeks, it will likely crash into the side of a mountain.

What’s kept us in the air so far is an extraordinary government relief effort. In most states, evictions have been temporarily banned, preventing a mass homelessness crisis. Most federal student loan payments have been put on hold, removing one of the largest recurring monthly expenses that millions of people face. Banks were ordered to give their customers a six-month break on mortgage payments if requested.

Most importantly, and counterintuitively, household income sharply increased in April as hundreds of billions of dollars in lost wages were replaced by trillions in government spending. The government sent out more than 159 million stimulus payments of up to $1,200 per adult (more if you have kids), and more than 20 million unemployed people became eligible for an extra $600 a week in federal unemployment benefits. The result, according to Bloomberg, was the largest monthly increase in household income ever recorded.

This happened in April, when there were far fewer things to spend your money on; shops and restaurants were closed, nobody went to the ball game or took the kids to a theme park, and a shaggy nation longed for a haircut. Meanwhile, the prospect of a massive economic crash meant that Americans who were still on the job were more likely to tuck money away that they might otherwise have spent. So the national savings rate — the share of people’s income that is saved rather than spent — hit 33%, according to the US Bureau of Economic Analysis, also the highest level ever recorded. In the same month that we reached the worst mass unemployment in living memory, Americans saved a total of $6.15 trillion — up by $4 trillion from the month prior.

The massive interventions that made all this possible will soon come to an end — but the unemployment won’t.

On July 31, the $600 federal unemployment payments going to unemployed people every week will end, and there’s no sign they’ll be replaced with anything nearly as generous. In fact, many Republicans want to replace them with nothing at all — and there’s also little sign that another round of one-time stimulus checks will get mailed out. So income for tens of millions of households is likely to nose-dive in August.

That will coincide with evictions returning after being put on hold for months. This month, about one-third of renters were unable to pay their rent in full or at all, despite all the stimulus money. A federal law that bans evictions in any properties financed by federally backed mortgages — more than a quarter of all households, according to one estimate — expires on July 25, just a week before millions of people’s main economic lifeline is pulled away. Unless they are extended, statewide orders banning all evictions in places that have been hardest hit by the unemployment crisis will also expire around then: Florida’s on July 1, California’s on July 28, and New York’s on Aug. 20.

As millions of people experience a sudden collapse of their income at the very moment their landlords are allowed to start kicking them out, other bills will also come due. Payments on millions of paused student loans will begin again at the beginning of October; the more than 4 million homeowners who received a six-month pause on their mortgage after April’s mass layoffs will need to start making payments again at the end of October.

Few seriously expect the US economy to recover as fast as those bills come due; the federal government’s own projections expect unemployment will remain frighteningly high well into next year, even as people return to work as the lockdowns are lifted. Many companies will only rehire workers as quickly as consumer demand returns, and in labor-heavy industries, such as restaurants, entertainment, and travel, nobody expects things to go back to normal anytime soon.

And across the economy, big employers will use this moment as a kind of workforce reset button — a chance to rethink how many workers they really want, outsource some jobs, offshore others, and eliminate some entirely. By some estimates, more than 40% of all the job losses of the last few months could be permanent, not temporary.

You might have noticed a few major things — like, well, the coronavirus pandemic — missing from this equation. If we’re really lucky, we won’t experience a nasty second wave of infections in the fall and early winter, spurring new rounds of attempted lockdowns shortly after the economic plane crashes into the mountain — lockdowns that will once again disproportionately affect Black people and people with low incomes who can’t safely work from home. Fingers crossed on that one.

And I didn’t mention the nationwide protest movement that shows no sign of slowing down, or the US election that will be overheating in the fall, involving a phenomenally unpopular and wildly divisive president whose passionate supporters tend to distrust the government.

These are all ingredients in what Adam Elkus memorably described recently as the “omni-crisis” that we’re currently stumbling our way through. “The omni-crisis has significantly enlarged the space of possible outcomes beyond that normally considered day-to-day by most Americans,” he wrote. “And it is not clear how many people in positions of influence and authority recognize this.”

That will become clearer in the next few weeks as Congress considers what comes next. So far, the Democrat-controlled House has passed an expansive new relief bill with trillions in new spending, which was declared dead on arrival by the Republican-controlled Senate — and Republicans don’t seem to be in much of a hurry to even begin negotiations. There are hints that our political leaders understand the gravity of the crisis, but they may be simply incapable of rising to the moment.

Or Republicans just don’t care. Their Wall Street campaign contributors have been taken care. Mission accomplished. Main Street and lowly workers are just collateral damage, nothing to concern them about.

You can vote these Republicans out of office and prove them wrong.