Deficit Sets a Record in January

By Yuval Rosenberg

Real Unemployment Rate Is Close to 10%, Fed Chief Says

Federal Reserve Chairman Jerome Powell painted a bleak picture
of the labor market Wednesday, saying that joblessness is probably
worse than the official data indicate and that it could be
difficult to get back to full employment in the foreseeable
future.

In comments delivered to the Economic Club of New York, Powell
said the economy is still "a long way" from where it needs to be to
enable millions of people to return to work. "Fully realizing the
benefits of a strong labor market will take continued support from
both near-term policy and longer-run investments so that all those
seeking jobs have the skills and opportunities that will enable
them to contribute to, and share in, the benefits of prosperity,"
he said, according to
prepared remarks.

The Fed chief emphasized that monetary policy alone won’t be
able to heal the job market. "Given the number of people who have
lost their jobs and the likelihood that some will struggle to find
work in the post-pandemic economy, achieving and sustaining maximum
employment will require more than supportive monetary policy,"
Powell said. "It will require a society-wide commitment, with
contributions from across government and the private sector."

10% unemployment? Reviewing the change in the labor
market over the last year, Powell noted that there are problems
with the way unemployment is measured. "After rising to 14.8
percent in April of last year, the published unemployment rate has
fallen relatively swiftly, reaching 6.3 percent in January," he
said. "But published unemployment rates during COVID have
dramatically understated the deterioration in the labor market.
Most importantly, the pandemic has led to the largest 12-month
decline in labor force participation since at least 1948."

Additionally, errors seem to be distorting the picture. "[T]the
Bureau of Labor Statistics reports that many unemployed individuals
have been misclassified as employed. Correcting this
misclassification and counting those who have left the labor force
since last February as unemployed would boost the unemployment rate
to close to 10 percent in January," Powell said.

Interest rates will stay low for a while.
The Fed will continue to keep interest rates low and engage
in substantial asset purchases, Powell said, in keeping with its
revised framework that puts more weight on labor market conditions.
The central bank is unlikely to "even think about withdrawing
policy support" anytime soon. "In particular, we expect that it
will be appropriate to maintain the current accommodative target
range of the federal funds rate until labor market conditions have
reached levels consistent with maximum employment and inflation has
risen to 2 percent and is on track to moderately exceed 2 percent
for some time," Powell said.

Deficit Jumps to $163 Billion in January, $736 Billion for
First Four Months of Year

The federal budget deficit rose sharply to $163 billion in
January, the Treasury Department
announced Wednesday, as the government pumped more
money into an economy still suffering from the effects of the
coronavirus pandemic.

Both revenues and outlays hit record highs for the month, with
receipts increasing 3% on a year-over-year basis to $385 billion
and outlays growing 35% to $547 billion. "Tax receipts have mostly
recovered from the pandemic, reflecting a resilient U.S. economy
and the ability of private-sector companies to adjust,"
wrote MarketWatch’s Jeffry Bartash. "Yet tax
receipts rose year-on-year by almost 10% in January 2020, showing
the economy still has a way to go to return to precrisis growth
levels."

The deficit for the first four months of the fiscal year, which
began in October, rose to $736 billion, an 89% increase over the
same period a year earlier.

Big deficits will likely persist: The
big jump in the deficit in January was driven by Covid-related
spending, boosted by the passage of a $900 billion relief bill in
late December, which authorized a wide range of relief programs,
including $600 per person relief checks and enhanced unemployment
benefits.

Poll of the Day: Just 20% Say Biden Relief Package Is Too
Big

As lawmakers debate whether President Biden’s $1.9 trillion
Covid relief package is the right size, a
new poll finds that 39% of Americans say it is —
and another 40% say it is not enough. Only one in five of those
surveyed say the package is too big, but a plurality of
Republicans, 38%, hold that opinion. See the full breakdown by
party affiliation below.

Three in four Americans say it’s at least somewhat important
that the legislation have bipartisan support, including 41% who
call it very important.

Overall, 83% say they approve of Congress passing another
economic aid package, while 17% disapprove. About one in four
Americans says that the pandemic has had a major impact on their
family finances, but that number rises to 35% among those with
incomes under $50,000.

Just over 60% of Americans say that the rollout of the Covid
vaccine in their state has been too slow, but 45% now say that the
fight against the outbreak is going well, up 10 percentage points
from last month. Democrats have become more upbeat since Biden took
office, while Republicans have become more negative.

The poll of 2,508 U.S. residents was conducted for CBS
News by YouGov between February 5 and 8. It has a margin of error
of 2.3 percentage points.

Wyden Unveils $500 Million Plan to Upgrade Unemployment
System

Sen. Ron Wyden (D-OR) on Wednesday unveiled new legislation
calling for a $500 million effort to address the technological
problems at state unemployment systems that have complicated the
process of getting unemployment insurance for millions of
Americans.

The Washington Post’s Tony Romm
reports:

"The new proposal takes aim at the complex, dated patchwork of
state systems that forced many cash-starved families last year to
wait weeks to receive their first unemployment checks. Wyden’s bill
envisions a new $500 million federal effort to standardize
unemployment websites and other tools, which would be made
available for states to adopt as their own as they see fit.
"Wyden’s measure is backed by fellow Democratic Sens. Sherrod
Brown (Ohio), Catherine Cortez Masto (Nev.) and Mark R. Warner
(Va.). It marks a direct response to the technical glitches last
year that slowed unemployment websites, left government phone lines
clogged and marred the U.S. government’s economic response to the

coronavirus, as millions of Americans who
unexpectedly lost their jobs struggled to stay current on their
bills."

Romm cites an
analysis by the left-leaning Economic Policy
Institute that found that as between 7.8 million and 12.2 million
more people could have could have filed for unemployment insurance
early in the pandemic if the process had been easier, meaning that
only about half of potential applicants were receiving benefits as
of late April.

Number of the Day: 11.4 Million

An estimated 11.4 million Americans stand to lose their
unemployment benefits between March 14 and April 11 unless Congress
quickly passes an extension as part of its next coronavirus aid
package, according to a new
report from The Century Foundation, a left-leaning
think tank. More than 4 million workers would see their benefits
end on March 14 and about 7.3 million more would have their
payments expire over the following four weeks. Without another
extension, the report says, only some 734,000 workers in 12 states
would be able to receive extended state unemployment benefits in
April.

President Joe Biden’s $1.9 trillion relief package would
continue the emergency unemployment payments and increase benefits
under the Federal Pandemic Unemployment Compensation program
from $300 a week to $400 a week. The report says that
continuing the pandemic benefits could deliver $9.6 billion a week
to families, and it urges lawmakers to act ahead of the March 14
deadline to give states enough time to prepare for the new
guidelines and ensure that benefits are not interrupted.

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