WILL THE JOBS REPORT DESTROY JOBS?
On Friday the Bureau of Labor Statistics released its report on the employment situation in May. The report was much better than most economists expected, showing a large gain in jobs and a fall in the unemployment rate.
The thing is, a good jobs report may be bad for future policy. Why? Because the U.S. economy is still very much on life support. And a bit of good news is all too likely to encourage the usual suspects to end that life support too soon, with dire effects just a few months from now.
Before I get there, let me address one widespread concern. Were the employment numbers rigged?
No, they weren’t. The jobs report is prepared by a large, professional staff that takes its responsibilities seriously. And it contains much more than the headline numbers. It’s not the kind of thing that could be altered with a Sharpie, and any effort to fake it would have set off multiple alarm bells.
In fact, the overall picture painted by the employment report makes considerable sense. It shows a partial bounce back of contact-intensive sectors like restaurants and dentists’ offices that were largely shut down by social distancing; these are exactly the things you’d expect to show some growth as social distancing is relaxed.
So the good news, despite statistical problems created by the unique economic situation is real. But it’s also very limited.
So far, employment numbers in this time of COVID-19 look like a fishhook: a huge decline followed by a much smaller upturn. Unemployment is still higher than it was for most of the Great Depression. And while unemployment overall fell in May, it rose slightly for black workers.
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. But unless Congress and the White House act, that safety net will be yanked away by August.
More specifically, enhanced unemployment benefits, which are both more generous than standard benefits and cover more people, have been a huge source of support despite the difficulties many have faced in getting enrolled. Among other things, those benefits have — temporarily — made it possible for millions of families to keep paying rent on their homes. But those benefits will expire July 31.
And the Paycheck Protection Program,
which offers small businesses loans that can be converted into grants if they’re used to maintain payroll, is already out of money, and the job support lasts only eight weeks.
So two of the main things sustaining the economy are set to disappear. At the same time, Congress has yet to provide major relief to state and local governments, which are facing a huge fiscal crisis and have already laid off a million and a half workers; there will soon be many more layoffs unless aid comes soon.
House Democrats have passed the HEROES Act, a very good bill extending and improving economic relief. But Friday’s employment report encourages Republicans to revert to type; they’ll almost surely block any significant further relief until or unless the economic situation becomes even more dire than it is.
It also encourages them to push for more opening, more relaxation of social distancing, despite the fact that COVID19 is nowhere near under control.
So it’s all too possible that we’ll see an ugly scene in the late summer and early fall — more government layoffs and widespread job losses in industries that have so far been relatively unscathed as desperate workers slash spending, all against the backdrop of a resurgence in hospitalizations and deaths.
Maybe we’ll be lucky and the bad things I’m worried about won’t actually materialize. But hoping for the best isn’t a plan.