Friday, June 5, 2020

Economic numbers- and a fig leaf

David Dayen, The American Prospect 
First things first: these are legitimate numbers (What Paul Krugman tweeted was insane and he’s now apologized). They don’t seem to square with the weekly unemployment claims numbers, which puts those collecting unemployment benefitshigher than the unemployment rate for the first time in history. You can get unemployment benefits through the CARES Act’s Pandemic Unemployment Assistance program even if you work part-time, but that doesn’t explain this discrepancy.
However, in a long note at the bottom of the BLS report, the bureau explains their difficulties with data collection, as well as a quirk in the data: “there was also a large number of workers who were classified as employed but absent from work.” Those were supposed to be marked as on temporary layoff, but they’re listed as employed. If that was corrected, “the overall unemployment rate would have been about 3 percentage points higher than reported.” BLS didn’t change that because they have a strict rule to accept the data as recorded.
Long story short, BLS is telling us that we’re at 16 percent unemployment. And while that’s better than the nearly 20 percent (if you include the misclassified) in the April jobs report, it means we’ve only brought a small sample of those workers back. The level of employment remains sharply reduced from the pre-pandemic months; we’ve maybe brought back a little over 10 percent of the jobs.

But the topline numbers don’t say 16 percent unemployment, they say 13 percent. And this report, which in a vacuum looks pretty good, is being taken inside the Trump administration as a declaration of victory, that their policies worked, and as the country reopens no further support will be necessary. Trump scheduled a hastily arranged news conference to tout the comeback. “It takes a lot of the wind out of the sails” of continuing economic relief, White House economic advisor Stephen Moore told the Washington Post’s Jeffrey Stein. “There's no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report.”
That couldn’t be less true. This bounce-back is meager in real terms and tied to the direct funding of payrolls through the PPP, which only lasts eight weeks. That means PPP funding will cover the next jobs report in June and then will be gone. By July, state and local government cuts will kick in, as they’ve already been doing: the April and May jobs reports showed a combined loss of 1.5 million state and local jobs. 
Many states have fashioned their budgets with a “trigger,” expecting federal aid and building that into their budget profile. If this jobs report means that no such help will arrive, the triggers will be breached, and the deeper cuts will ensue.
We haven’t yet seen in this crisis the feedback loop of economic depression, where job loss leads to lower incomes, which leads to less spending and consequently more job loss. That’s entirely because of temporary government action sufficiently filling the hole from layoffs, from one-time stimulus checks and boosted unemployment insurance. But no extension of these efforts would mean that enhanced unemployment would run out in July with nothing in its place. That would seriously contract incomes, precisely at the time that PPP funding runs out. Then you definitely could get that feedback loop going, bolstered by state and local government employee layoffs. And once you’re in that undertow, it’s harder for policymakers to pull out of it.

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