Trump Touts ‘Rocket Ship’ Recovery

By Yuval Rosenberg

Trump Touts ‘Rocket Ship’ Recovery. Does That Mean Next
Stimulus Is Dead?

Friday’s jobs report was a complete stunner. The economy
added 2.5 million jobs in May, the Labor Department announced,
smashing expectations of millions more job losses, and the
unemployment rate fell to 13.3%, down from 14.7% in April.

President Trump hailed the numbers, touting them as an
indication of a strong economic rebound from the coronavirus
pandemic, a salve that would heal the racial tensions on display
across the country over the last week and “affirmation of all the
work we’ve been doing, really for three and a half years.”

“Today is probably, if you think of it, the greatest comeback in
American history,” Trump said at a hastily arranged news conference
in the White House Rose Garden.

Trump celebrates ‘a very big day for our country’: “This
is better than a V,” Trump said about widespread prognostications
about whether the economic recovery would be shaped like a V, a U,
a W or even a Nike swoosh. “This is a rocket ship. This is far
better than a V.”

The president spoke for nearly an hour, and his rambling remarks
covered a lot of territory —
a whole lot — but were mostly a victory lap
centered around the jobs numbers and how they could fix what seems
broken in the country, including the protests sparked by the
killing of George Floyd in Minneapolis police custody. “Hopefully
George is looking down right now and saying, ‘This is a great thing
that’s happening for our country.’ This is a great day for him.
It’s a great day for everybody,” Trump said.

What does this mean for the next coronavirus relief bill?
Trump said Friday that he’ll still pursue additional stimulus
money, “despite the numbers and how good they are.” He also said he
would push for a payroll tax cut, a proposal that many lawmakers
and economists have greeted with skepticism, saying it’s unlikely
to deliver help to those who need it most. Trump said that a
payroll tax cut would be a “tremendous incentive” for businesses
and workers. And he said he’d seek targeted aid for restaurants and
parts of the entertainment industry.

Still, the stronger-than-expected jobs numbers will almost
certainly diminish the chances for another large coronavirus relief
bill. "This definitively kills any chance of trillions of new
spending," one Senate Republican aide said,
according to The Washington Post’s Jeff Stein, who also
reported that White House economic advisers Art
Laffer and Stephen Moore said that the jobs report shows Congress
can hold off on new stimulus spending. “The sense of urgent crisis
is very greatly dissipated by the report,” Moore told the Post.

Even before Friday’s jobs report, Post
reported that the president was reluctant to
pursue a new stimulus package, citing White House officials and
Trump advisers. Conservatives have reportedly urged Trump to hold
off on providing more money to states hit by the pandemic and focus
instead on tax breaks for businesses as well as cutting regulations
and the trade war with China, and the president is in no mood to
work with Democrats who have criticized him for his responses to
the pandemic and mass protests.

Trump’s opposition to additional stimulus “is privately seen as
soft and pliable,” the Post’s Robert Costa and Ashley Parker write,
and it could depend largely on the outlook for his reelection
campaign against presumptive Democratic nominee Joe Biden.

“He could go from saying ‘I’ll do nothing more’ to saying ‘I’ll
do $1 trillion more’ in a second if he thinks it helps him with
beating Biden,” an unnamed Trump adviser told the Post.

Economists worry about a ‘nightmare scenario’: Some
economists warn that celebrating one jobs report as evidence of an
economic rebound could be premature — and could ultimately
undermine a recovery if it reduces further stimulus efforts. “This
is how one good jobs report can turn into a nightmare scenario,”
Ernie Tedeschi, a Treasury economist during the Obama
administration now at Evercore ISI,
tweeted.

Months of extraordinarily strong job gains will be needed to get
near the low unemployment levels the U.S. saw at the beginning of
the year. Michael R. Strain, director of economic policy studies at
the conservative American Enterprise Institute, tweeted that the
13.3% unemployment rate is “an economic and human disaster,” and
that another coronavirus bill remains necessary. “Workers,
families, and small businesses need Phase 4,” he said. “There’s no
doubt about the need.”

Economists also point out that the unemployment numbers
may reflect the massive fiscal support Congress has provided so
far, particularly the Paycheck Protection Program of forgivable
loans to small businesses, which likely helped fuel strong gain in
the restaurant and retail sectors. “Many economists expected the
PPP would be a big factor in June, but it turns out the impact was
sizable in May,” the Post’s Heather Long
explains. “Most economists look at these numbers
and urge Congress and the White House to keep the PPP and other aid
going. Most of the government relief money is slated to dry up by
the end of July.”

What theShockingly Strong Jobs Report Really Means

Forecasters had expected the report to show millions of
job losses and an unemployment rate near 20%. Instead, it delivered
the best one-month jobs number since at least 1939, while providing
strong support for the view that the worst of the coronavirus
recession is now behind us.

Here’s a roundup of details and comments on the jobs
report few if any experts saw coming:

The economy is reopening: “These improvements in
the labor market reflected a limited resumption of economic
activity that had been curtailed in March and April due to the
coronavirus (COVID-19) pandemic and efforts to contain it,” the
report said. “In May, employment rose sharply in leisure and
hospitality, construction, education and health services, and
retail trade.”

What rebounded, what’s still shrinking: The leisure
and hospitality sector led the pack with a gain of 1.2 million jobs
in May, after losing 7.5 million jobs in April. Health care also
made a big comeback with 321,000 jobs (led by dentists, who gained
244,000 jobs). But other sectors are still contracting. Government
payrolls, which include public school teachers, shrank by 585,000
in May as state and local governments continued to struggle with
plunging tax revenues and increased social spending. And job losses
continued in the air transport, transportation and warehousing,
mining and logging, and information sectors.

The economy still has a long way to go: The May
jobs picture may have been much stronger than expected, but it’s
still not good. The 13.3% unemployment rate is still far higher
than the 10.1% peak during the Great Recession, and 21 million
people are still unemployed. Employment is roughly 13% below its
level in February, before the pandemic struck. And the numbers may
still be understating the problem. Millions of workers on furlough
were not included in the unemployment numbers; had they been
counted, the unemployment rate would have been over 16%. Adding in
workers who have given up and left the labor force, and the
unemployment rate could be closer to 20%.

And the jobs gains were not evenly distributed in the
population. While unemployment rate for whites fell to 12.4%, down
from 14.2% in April, the jobless rate for black workers rose
slightly to 16.8%. The Asian unemployment rate also rose, from
14.5% to 15%.

More bumps ahead? “While the labor market recovery
started a month or two earlier than expected, therefore suggesting
a V-shaped trajectory in the early stages of the recovery, it
doesn't tell us about the ultimate shape of the recovery,”
researchers at Bank of America said in a note. “We continue to
remain concerned about the health of the economy after the initial
jump higher from reopening. The path ahead is still likely to be
bumpy given risks posed from the virus and many millions of
displaced workers.”

Chris Rupkey, chief economist at Mitsubishi Financial
Group, had a particularly pessimistic take on the road ahead,

saying that “all the workers who lost their
paychecks will find it difficult to regain their place in society
as many of these jobs are gone forever. It took years for the
economy to grow enough to find jobs for those unemployed in the
last recession, and it will take years again this time to do the
same.”

Quote of the Day

“It would seem to be that if anybody has an incentive
to get another big stimulus package through Congress soon, it’s
Donald Trump, who’s facing voters in November. I can’t tell if this
is just a negotiating tactic on his part or if he’s listening to
some of the hard liners in the White House. It’s really
baffling.”

– David Wessel, director
of the Hutchins Center on Fiscal and Monetary Policy at the
Brookings Institution, in
The Washington Post piece reporting Trump’s
reticence for a big new stimulus package.

Charts of the Day

Pain for Public Payrolls: The
May jobs report shows that state and local governments have been
cutting back aggressively, with more jobs lost in the past two
months than in all of the Great Recession. Most of the cuts were in
schools, which lost 373,200 jobs last month. Some economists worry
that essential service providers such as firefighters may be next.
“Such job cuts, if maintained, could exert a drag on the recovery,”
Bloomberg’s Danielle Moran said Friday.
Josh Bivens, director of research at the Economic Policy Institute,
said that “[i]t’s going to be a very incomplete recovery, even at
the end of 2021, if we don’t deal with the state and local
sector.”

Are Jobless Benefits Really Too Generous?
Some lawmakers have expressed concerns that the $600 per week
enhanced unemployment benefits provided by the CARES Act are too
generous and may be delaying the recovery by allowing workers to
stay home rather than returning to their jobs. But an
analysis published this week by Morning Consult
economist John Leer finds that about half of workers receiving
benefits are earning less than they were before.

“While there is evidence that some workers are earning
more from UI [unemployment insurance] benefits than they were from
their pre-pandemic jobs (30 percent), a far greater share of UI
recipients brings in less than what they made prior to the pandemic
(49 percent),” Leer writes. “While some workers may be better off
receiving UI benefits than they were while working, the totality of
evidence argues that unemployed and underemployed workers receive
on balance less money than they did prior to the coronavirus
pandemic.”

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