Worst Unemployment Since the Great Depression

Worst Unemployment Since the Great Depression

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Plus: Dem senators propose $2,000 monthly coronavirus payments
Friday, May 8, 2020

Unemployment Rate Soars to 14.7%, Worst Since Great Depression

The U.S economy set new records last month for job losses and the unemployment rate, the Labor Department announced Friday, as the coronavirus pandemic took an enormous toll on economic activity throughout the country.

Nonfarm payroll employment fell by 20.5 million during the month, driving the unemployment rate to 14.7%.

The job loss numbers reflect the largest monthly employment contraction in U.S. history, dwarfing the monthly totals seen during the 2008-2009 recession and the previous record set just after World War II. The unemployment rate is now the highest since the Great Depression.

The sheer size of the crisis: "The number of workers who swiftly lost work in April is beyond belief," said Nick Bunker of Indeed Hiring Lab. "With today's report, the full scope and scale of the current labor market crisis is only now coming into focus."

Labor force participation plunges: The labor force participation rate fell to 60.2% in April — the lowest since January 1973. And the employment-to-population ratio dropped to 51.3%, reflecting the largest one-month decline and the lowest reading in U.S. history.

Hospitality sector hit hard: The leisure and hospitality sectors lost 7.7 million jobs — nearly half of all employment in hotels, bars, restaurants, tourism and travel — and those losses accounted for 37% of the total for the month. In other sectors, retail shed 2.1 million jobs, manufacturing lost 1.3 million and white-collar sectors saw 2.1 million job losses. State and local governments also started cutting back, with a nearly 1 million layoffs. And in what may seem odd during a health crisis, the medical sector lost 1.4 million jobs as elective procedures were put on hold and Americans avoided the health care system whenever possible.

Big differences by education: The unemployment rate soared to 21.2% for those without a high school degree, a record high. College graduates registered an 8.4% unemployment rate, while 17.3% of those with a high school degree were out of work.

The true numbers are probably even worse: Economists say that timing and measurement issues almost certainly underestimate the true extent of the damage. Michael Feroli of J.P. Morgan said, factoring in all the people who had left the workforce and those who were likely misclassified as “employed but not at work due to other reasons,” the unemployment rate would be closer to 23%. The Bureau of Labor Statistics agreed on the general point, saying the unemployment rate would have been nearly five points higher had more “absent from work” people been included.

More federal aid is probably needed: “This unemployment rate should be a real kick in the pants -- and maybe even the face,” former Federal Reserve economist Claudia Sahm told The Washington Post. “Congress has to stay the course on aid until more people are back at work.”

Trump say he’s not worried — and not to blame: Speaking to “Fox & Friends” Friday morning, President Trump was sanguine about the report. “It's fully expected. There's no surprise. Everybody knows this," he told the show’s hosts. “Somebody said, ‘Oh, look at this.’ Well, even the Democrats aren't blaming me for that. But what I can do is I'll bring it back.”

A glimmer of hope: The share of people who said they are unemployed on temporary basis soared to a record 80% in April, more than three times the level in March. “Such a large share of temporarily unemployed Americans indicates they may be able return to their previous employers quickly as the nation emerges from the economic stoppage,” says Vince Golle of Bloomberg News.

But long-term picture is far from rosy: Economists say that the longer the crisis goes on, the more likely that temporary job losses will become permanent. “This is pretty scary,” Lindsey Piegza, chief economist at Stifel, told the Post. “I’m fearful many of these jobs are not going to come back and we are going to have an unemployment rate well into 2021 of near 10 percent.”

Joseph Brusuelas, chief economist at consulting firm RSM, told Politico’s Ben White that the U.S. has a tough road ahead, despite what some political leaders are saying about a quick recovery: “We have to be utterly realistic about this because there is political fantasy out there and then there is economic reality. It is going to be years before we recover all of these lost jobs and as much as 25 percent of them aren’t ever coming back.”

House Dems Eyeing a Plan to Replace Troubled PPP: Report

House Democrats are coalescing around a plan to replace the problem-plagued Paycheck Protection Program for small businesses with an expanded program offering grants covering 100% of workers’ salaries and benefits, The Washington Posts’ Tory Newmyer reports:

“The proposal borrows from similar programs that Western European and Asian countries have already implemented to keep employees on the payrolls of damaged businesses. It aims to replace the relief the troubled Paycheck Protection Program has provided small businesses and expand it to businesses of all sizes, while cutting out banks as middlemen.

“And it stands a strong chance of making it into an economic rescue package House Democratic leaders are racing to assemble and roll out in the coming days, Democratic lawmakers and top aides say. ‘It has picked up an enormous amount of momentum very quickly,’ Rep. Pramila Jayapal (D-Wash,), who is spearing the effort, tells me.”

The plan would be retroactive to March 1, Newmyer adds, allowing businesses to rehire laid-off workers. An analysis by Moody’s Analytics chief economist Mark Zandi projects the program would cost a net $654 billion, including savings from having fewer jobless people rely on unemployment benefits and Medicaid.

Democratic Senators Unveil Bill to Give Americans $2,000 a Month Throughout Pandemic

Democratic Sens. Kamala Harris of California, Ed Markey of Massachusetts and Bernie Sanders of Vermont unveiled a bill Friday to give most Americans $2,000 a month for the duration of the coronavirus crisis.

How it would work: The legislation, called the Monthly Economic Crisis Support Act, would provide direct payments of up to $2,000 a month to individuals who make less than $120,000. The payments would start to phase out above $100,000. Married couples filing taxes jointly would get $4,000, and parents would get $2,000 per child for up to three children. The plan would be retroactive to March and continue for three months after the Health and Human Services Department has declared that the public health emergency had ended.

The payments would go to all eligible U.S. residents regardless of whether they filed a tax return or have a Social Security number. The bill would also forbid debt collectors from seizing the relief payments.

Why the senators says it’s needed: The CARES Act passed by Congress in March provided for one-time Economic Impact Payments of up to $1,200 for individuals and $2,400 for couples, plus $500 for each qualifying child, with full payments limited to those earning up to $75,000 ($150,000 for couples). The trio of senators behind the new bill say those payments are not nearly enough to get households through the crisis.

“Bills will continue to come in every single month during the pandemic and so should help from government,” Harris said in a statement. Markey added: “Providing recurring monthly payments is the most direct and efficient mechanism for delivering economic relief to those most vulnerable in this crisis, particularly low-income families, immigrant communities, and our gig and service workers.”

The political lens: “This is one of several COVID-19 related proposals Harris has introduced while she's been rumored to be a potential vice presidential pick for presumptive Democratic presidential nominee Joe Biden,” CBS News’s Tim Perry notes.

Republicans unlikely to back more relief payments: Congress’s Joint Committee on Taxation estimated that the one-time direct payments authorized by the CARES Act would cost $293 billion. This proposal would obviously cost far more, making it unlikely to find much support among Senate Republicans, many of whom have expressed wariness about additional coronavirus spending.

Some Republicans objected to the first round of direct payments and several have indicated that they strongly oppose the idea of additional stimulus checks. “Well, people in hell want ice water too,” Sen. John Kennedy of Louisiana said when asked about another round of checks, according to The Hill. “I mean, everybody has an idea and a bill, usually to spend more money. It’s like a Labor Day mattress sale around here.”

Number of the Day: $737 Billion

“The federal budget typically records a surplus in April because final tax payments for the prior year and estimated payments for the current year are usually due on April 15,” the Congressional Budget Office said Friday. “But this year, the government incurred a deficit of $737 billion in April … compared with a surplus of $160 billion last year.”

Federal tax receipts fell 55% last month compared to April a year ago, thanks in large part to the delay in the tax filing deadline due the coronavirus pandemic. A sharp drop in economic activity, falling wages and new tax cuts also contributed to the shortfall.

Poll of the Day: 64% Say Opening Now Not Worth It

Nearly two-thirds of Americans say reopening the country now is not worth it because it will mean more lives are lost, according to the latest ABC News/Ipsos poll. But the poll also finds stark partisan, racial and gender differences in views of reopening, including a nearly 60 percentage point gap between Democrats and Republicans. While nearly all (92%) of Democrats say opening the country now isn’t worth it, only 35% of Republicans agree. Among independents, 63% oppose opening up the country.

The poll, conducted May 6 and 7 among a random national sample of 532 adults, has a margin of error of 4.9 points.

Small Biz Loans Aren’t Going to Hardest Hit Areas

Congress has given the Paycheck Protection Program more than $660 billion as part of a massive effort to help small businesses pay rent and keep workers on the payroll. But the money isn’t necessarily going to the people and places that need it most.

Researchers at the Federal Reserve Bank of New York have determined that a higher percentage of small businesses in the Midwest and Mountain states are getting PPP loans compared to those in hard hit areas such as New York, New Jersey, Michigan and Pennsylvania.

“In New York, the epicenter of the coronavirus in the United States, less than 20 percent of small businesses have been approved to receive PPP loans,” the researchers wrote in a blog post earlier this week. “In contrast, more than 55 percent of small businesses in Nebraska are expecting PPP funding.”

In fact, the researchers found no relationship between the local severity of the coronavirus epidemic (as measured by the number of cases and unemployment claims) and the percentage of businesses receiving PPP loans. The relationship is actually negative if New York and New Jersey are included in the analysis, but neutral when they are excluded.

So what does explain the distribution of PPP money? Pre-existing banking relationships and the prevalence of smaller local banks. “[W]e find that lenders’ preference for borrowers with an existing relationship and the market share of community banks are the main factors explaining the geographical variation in PPP funding,” the researchers said.

Your Prize for Making It Through the Week

Street artist Banksy honored health care heroes fighting the pandemic with a new work at a U.K. hospital. The piece, titled "Game Changer," shows a child playing with a new superhero — a nurse doll wearing a mask and cape, while his Batman and Spider-Man action figures are relegated to his wastebasket.


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