We’ve had plenty more news this week indicating just how bad things are economically now and how long they are likely to remain bad. Federal Reserve Chairman Jerome Powell, who has warned that gross domestic product could drop 30% this quarter, on Wednesday reinforced what other analysts have said about the crunch affecting American workers: ”It’s just going to be very hard to say. But my assumption is that there will be a significant chunk, well into the millions—I don’t want to give you a number because it’s going to be a guess—but well, well into the millions of people who don’t get to go back to their old job. In fact, there may not be a job in that industry for them for some time. There will eventually be, but it could be some years before we get back to those people finding jobs.” He noted that low-wage workers, women, African Americans and Latinos have been hit especially hard.
Another big bunch of people who may be among those workers who find themselves in that same boat filed new claims for state or federal unemployment benefits in the week ending June 6, the Labor Department reported Thursday. Together, on a non-seasonally adjusted basis, 1.537 million filed new claims for state benefits and 705,676 filed for federal benefits under the Pandemic Unemployment Assistance that covers free-lancers and other workers not eligible under state programs. All told, those who have filed and are receiving or waiting to receive benefits now total 35.4 million, a decrease from last week’s non-seasonally adjusted 37 million tally.
Because of the volatility being experienced in the labor market right now, the seasonal adjustment distorts what is actually happening in the labor market week to week. Moreover, the PUA filings are not seasonally adjusted. Mashing together adjusted and unadjusted skews the outcome.
That non-seasonally adjusted 35.4 million breaks down like this:
Regular State UI Initial Claims…………… 3.2 million
Regular State UI Continuing Claims…..18.9 million
PUA Initial Claims………………………………2.8 million
PUA Continuing Claims……………………..9.72 million
Assorted Other Categories………………..766,537
If those 35.4 million were the total number of unemployed, the unemployment rate would be about 22.5%. But counting unemployment benefit recipients isn’t how the Bureau of Labor Statistics tallies the unemployment rate. Last week, the bureau announced that the rate for May was 13.3%—with the last paragraph of an end-note pointing out that had workers who should have been marked as “unemployed on temporary layoff“ counted correctly, the rate would have been 16%. But this is nowhere near the 22.5% roughly indicated by the count of unemployment benefit recipients.
A few have asserted that the miscategorization of workers is due to some connivance at the Bureau of Labor Statistics to make Donald Trump look better. But former Obama-appointed BLS officials as well as other experts who are no pals of Trump have weighed in to say bureau procedures and the integrity of statisticians there prevent that from happening.
But in addition to the mistake, there was a big error in judgment at the BLS. Public acknowledgement of the error in categorizing some workers should have been made not at the end but as preface to the bureau’s job report. If it had been, newspaper and online news outlets and Foxaganda wouldn’t still be touting the 13.3% number as if the more accurate 16% estimate didn’t exist. Perhaps after two misses on that score, the BLS will do better in the June report.
No matter what the actual unemployment count is, it’s dreadful, far worse than the Great Recession at its worst when 10% were unemployed for a single month late in 2009. What that means massive stimulus on top of the trillions of dollars already paid out. More stimulus and a lot more oversight. Of course, the Senate Republicans stand firm against that, some of them citing the job report from last week as an indication that the economy will do just fine without it. This would be nonsense even if the perils of reopening the economy prematurely weren’t showing up in state after state as spikes in cases of COVID-19.
At the Economic Policy Institute, Josh Bivens and David Cooper write:
- If policymakers do nothing at the federal level to address these shortfalls, the United States could end 2021 with 5.3 million fewer jobs, with losses in every state.
- Further, if Congress passes some level of aid that is insufficient—less than $1 trillion—they will needlessly guarantee a significant job gap by the end of 2021.
- If they pass $500 billion of aid over that time, the jobs gap will likely be roughly 2.6 million. If they pass $300 billion of aid, the jobs gap will likely be roughly 3.7 million.
- While empirical estimates of the shortfall should guide policymakers’ thinking, they can (and actually should) avoid putting a firm sticker price on state and local aid by tying this aid to economic conditions. If the economy recovers faster than the forecasts driving the $1 trillion estimated shortfall indicate will happen, then less aid would be needed. If instead recovery lagged, more would be needed.
- Finally, filling in the estimated shortfalls would merely return state and local governments to their pre-crisis fiscal status quo. But the unique features of the current economic shock will put greater demands on public services than existed before the crisis. To go beyond macroeconomic stabilization and promote the general welfare, even more federal aid to these governments is likely needed.
This is wise and necessary. But repairing the economy to get back to the status quo isn’t enough. Not when the economy had plenty of chronic problems well before the Pandemic Recession got hold of us. Transformation is called for. Low interest rates plus people losing jobs they’ll never get back plus the need for building a sustainable economy to address climate crisis presents us with the opportunity for making that transformation if we are smart enough to grasp it.
For now, the Federal Reserve made clear on Wednesday that the current levels of interest are going to be with us for quite some time and the Fed continues with its relaxed approach. Stephen Stanley, chief economist at Amherst Pierpont Securities, told Bloomberg, “The Fed is clearly very sensitive to the fact that the Great Depression was made worse by not taking action, and they don’t want to make that mistake again. The Fed, at least right now, wants everyone to believe that it will be easy for as far as the eye can see.”
About the Author: Timothy Lange is a member of the Daily Kos staff.