No economic victory lap
Dr. Julianne Malveaux
The June Employment Situation report, released on July 2, showed a continued decline in the unemployment rate. Thanks to coronavirus, the rate shot up to 14.7 percent in April and declined to 11.1 percent in June. About 4.8 million more people were on payrolls in June than in May. Just about every sector of the economy saw job gains, including the troubled leisure and hospitality industries. The Council of Economic Advisors says this employment report “shatters expectations.” It represents progress in the recovery from the corona-generated recession, but I’m not sure what expectations have been shattered. This administration has been bragging about economic strength even when there was none.
It’s not yet time to throw a victory party, though. We still have a jobs deficit of about 15 million jobs, which means that while 7.5 million jobs were added in April and May, 22 million jobs were lost in March. If the economy continues to reopen, we might erase the jobs deficit by October or November at the rate we are going. But the economy CAN’T continue to open as it has. In some places, it is closing, with restrictions re-imposed. Some cities have introduced curfews. Others have closed bars. Still others are strictly imposing social distancing. Some beaches in Florida and California are closed in response to climbing virus numbers. And in early July, the daily number of positive tests is climbing. Dr. Anthony Fauci, the plain-talking infectious disease expert, says we may soon see 100,000 new cases per day, up from 50,000 plus in late June.
We know that the President considers himself a “cheerleader” for the economy, but you can’t cheerlead your way into economic prosperity. If 45 wants to cheerlead anything, he might try cheerleading social distancing or mask-wearing. Our inability to control COVID-19 and the lack of a vaccine will slow, not quicken, economic recovery.
While the employment report mostly showed improvement, the official unemployment rate does not include people working part-time who want full-time work, discouraged workers (who have stopped looking for work because they don’t think they can find it), and others considered “marginally attached to the labor force.” Add these to “official” unemployment, and the rate soars from 11.1 to 18 percent. And the Black unemployment rate, reported at 15.4 percent, shoots up to 24.9 percent. Is this really cause for celebration and superlative language?
The Federal Reserve Board has urged caution and does not see economic recovery anytime soon. They project a 9.3 percent unemployment rate by the end of this year, and a 6.5 percent rate by the end of 2021. The Congressional Budget Office has made similar projections, noting that some jobs just won’t come back, causing long-term problems.
Congress should use this information to strengthen the economy through spending and to bolster up cities and states that have laid off employees because they are collecting less tax revenue.
Some in the Senate balked at further bailouts, but pushing states into bankruptcy does not serve our nation’s economic stability. Then again, neither is the head-in-the-sand approach to the coronavirus healthy for the economy. The coronavirus is not a state rights issue, and it doesn’t stop at any border, but the variation in state policies is partly responsible for the increased spread of the virus.
A decline in the unemployment rate is a positive development as the economy moves toward recovery. But it is hardly cause for irrational optimism or celebration. And a healthy stock market is beneficial to stockholders, and fewer than half of all Americans hold stock.
Little of the employment conversation addresses low-wage workers, poverty, the failure of some employers to provide sick days, and health care challenges. In focusing on the aggregate, we miss the circumstances that many citizens face. Even before corona hit, one in 10 Americans and one in five African Americans were poor. More than 40 percent of us could not absorb a $400 emergency. If you are crowing about the “spectacular” economy, why not take a minute to acknowledge those who do not enjoy it?
Our “thriving” economy is an illusion. It’s doing better, but we’re not there yet. Now is not the time for a victory lap. It is overtime for dealing with issues of inequality.
Dr. Julianne Malveaux is an economist and author based in Washington, D.C. For more information please visit www.juliannemalveaux.com or email firstname.lastname@example.org