June 9, 2020

Jobs Report

The U.S. unemployment rate fell to 13.3% in May from 14.7%, and 2.5 million jobs were added — a surprisingly positive reading in the midst of a recession that has paralyzed the economy in the wake of the viral pandemic.” AP News

“The Labor Department also said its survey of households, which determines the unemployment rate, showed a large number of workers who said they were ‘employed but absent from work.’ The department in a footnote on data-collection challenges because of the pandemic said many of those people should have been counted as a temporary layoff, which would have made the May unemployment rate higher by about 3 percentage points. In April it said the same issue would have caused the rate to be about 5 percentage points higher.” Wall Street Journal

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From the Left

The left sees the unemployment numbers as encouraging and argues that further government support is needed.

“If you want to fully internalize the absurdity of the current economic situation, consider that the economy added the most jobs in history in the same month that economists predicted it would lose the most jobs in history. These expert forecasts weren’t off by a hair, or an arm’s length, or any remotely anthropomorphic margin. They were off by more than the civilian labor force of New York StateTo maintain our focus and keep our sanity, I offer three simple rules: Live like an optimist. Legislate like a pessimist. And don’t publish your economic predictions during a pandemic.”
Derek Thompson, The Atlantic

“The saving graces of the situation, such as they are, are that (a) while there is immense economic hardship, it’s not nearly as severe as you might have expected given Depression-level unemployment and (b) the employment slump has so far been mostly limited to contact-intensive sectors. That is, the crisis hasn’t — yet — spilled over into a crash of the economy as a whole…

“Both these saving graces, however, are the result of emergency aid — the safety net hurriedly put in place in late March, largely at Democrats’ insistence. This safety net alleviated hardship while allowing the unemployed to maintain spending and encouraging businesses to maintain their payrolls. And unless Congress and the White House act, that safety net will be yanked away by August.”
Paul Krugman, New York Times

“The surprisingly rapid rehiring of the furloughed is a positive sign. It suggests that Congress’s Paycheck Protection Program — which subsidizes small businesses that rehire their workers or avoid layoffs, and which kicked into high gear in late April — is doing its job. At the same time, the fact that government subsidies are responsible for much of the rehiring means that many of these recovered jobs remain at risk

“American restaurants brought 1.4 million workers back on staff in May. But consumer demand for dining out remains far below its pre-pandemic level. If Congress allows PPP funds to phase out this summer, while demand remains depressed, then many workers could ultimately find themselves being furloughed then rehired then permanently fired.”
Eric Levitz, New York Magazine

These key areas should be at the heart of the next package: a new, calibrated approach to unemployment insurance that extends and beefs up jobless benefits but removes some of the negative work incentives in the hastily devised program Congress launched in the March 27 Cares Act; continued support for small- and medium-sized businesses…  all necessary aid to testing, contact tracing and other public health measures to facilitate people’s return to work and education; and, crucially, substantial support for state and local governments that have hemorrhaged tax revenue even as demands for services have spiked…

“Mr. McConnell wants liability protection for reopening businesses. If limited to companies following science-based best practices that protect workers and customers, that should be something Democrats could accept in return for substantial state and local aid. Positive as the new job numbers are, they are no cause for complacency.”
Editorial Board, Washington Post

What would happen if Congress simply let the [unemployment benefits] expire? The average recipient would potentially see a 63 percent drop in their income. That’s according to an analysis by Evercore ISI managing director Ernie Tedeschi… Cutting the federal benefit in half to $300 would shrink the incomes of the unemployed by about one-third. Given the number of people who will likely still be out of a job by summer, that would almost certainly deal a significant blow to consumer spending power and slow down the recovery.”
Jordan Weissmann, Slate

“And, of course, there is the question of how the virus-infection rate will evolve as states continue to reopen their economies. So far, there hasn’t been a big second wave, but, earlier this week, Florida, which was one of the first states to relax its restrictions, reported the largest daily increase in cases that it has seen. That may be in part because of an increase in testing, but it is hardly an encouraging sign. According to a tally by the Times, the number of new cases is rising in nineteen states. Even after an encouraging jobs report, the economy remains hostage to the pandemic.”
John Cassidy, New Yorker

From the Right

The right sees the unemployment numbers as encouraging and argues that the additional unemployment benefits should be better targeted.

The right sees the unemployment numbers as encouraging and argues that the additional unemployment benefits should be better targeted.

“The biggest takeaway is that the ~2.7 million people who self-identified last month as ‘temporarily laid-off’ appeared to be right, and the dozens upon dozens of economists, experts, and analysts who sympathetically patted them on the head last month, saying, ‘There, there, it will be okay’ while assuring us those folks were all sitting ducks in a post-COVID economy where no one would ever go out to eat again were, well, wrong.  Really, really wrong…

“I am down on myself after not better predicting it in real time this week as I ate out at restaurants every single night, every one of which was packed, every restaurant filled with the familiar faces of waiters and waitresses I have seen for years.”
David L. Bahnsen, National Review

“Over 2.7 million temporarily laid-off workers — almost all covered by the Paycheck Protection Program — appear to be the first back on the job. Score one for PPP. Even more encouraging: Much of the growth was in service sector employment, which accounts for 80 percent of American jobs and has been hit disproportionately hard during the coronavirus crisis…

“We can hope that employment growth will continue and that the over-arching federal strategy of keeping businesses alive but on ice can help bring about a much-hoped-for v-shaped recovery. This isn’t the moment, however, for Congress and the administration to relax. Instead, they should maintain and improve policies that appear to work both for keeping people safe and getting them back to work.”
Brent Orrell, American Enterprise Institute

“CBO's conclusions confirm that an extended bonus unemployment benefit would indeed make it more profitable not to work for 5 out of 6 recipients… That's not the way things are supposed to work. Normally, unemployment insurance replaces 30% to 50% of normal earnings. It is only meant to ease the pain of a layoff temporarily, and it is set low enough that recipients are better off finding and taking a job. Although an extension of the $600 benefit would increase GDP in the second half of the year, it would slow it down throughout 2021 when GDP and employment levels would be lower than if the $600 bonus were allowed to expire in July…

“As a matter of pure utility, lawmakers ought to oppose the unemployment insurance expansion proposal. It's a bad idea to depress employment and economic output through 2021, to say nothing of the young taxpayers who will someday have to pay for additional spending that actually makes the economy worse for them now.”
Tiana Lowe, Washington Examiner

“It was one thing to deploy enhanced unemployment benefits for a limited time to help complement public health policy. It’s another thing entirely to create an enduring entitlement that is going to be a barrier to getting the economy moving again

“On Friday, the Bureau of Labor Statistics shocked everybody by reporting that 2.5 million jobs were created in May and the unemployment rate actually declined by 1.4 percentage points, which it said ‘reflected a limited resumption of economic activity.’ If that's what a limited resumption could do, it suggests that a broader reopening could lead to an even more rapid economic comeback. That will be impossible if Congress unwisely extends enhanced unemployment.”
Editorial Board, Washington Examiner

“Instead of boosting the weekly benefit check by the same dollar amount, regardless of prior earnings or state of residence, Congress could raise the replacement rate (benefits as a share of prior wages) by the same percentage in every state. For example, a state that normally replaces 35% of lost earnings might go up to 75%, while a state that normally replaces 50% could go up to 90%. In each case, the federal government would finance the additional 40% of lost earnings…

“A second way to reprogram the money would be to pay ‘back to work’ bonuses for a time, thus providing a positive incentive to work… think of these bonuses as ‘universal hazard pay.’ As many of the currently unemployed return to work, they would receive the back-to-work bonus instead of the $600. Because the extra $600 a week is so costly, replacing it would free up enough money to finance both of these options.”
Alan S. Blinder, Wall Street Journal

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