Economic report not bad (yet)

Bill Knight column for 7-9, 10 or 11, 2020

           

The U.S. economy shows glimmers of improvement, but it also may be reversing course in what’s been a slow, meandering route to recovery.

Concerns: Recent good news is outdated, the pandemic is resurging, federal jobless aid is expiring this month, state and local governments are going broke, and – most startling – only about half of adults are employed, according to the Bureau of Labor Statistics (BLS).

Last week, BLS’ jobs report showed the unemployment rate “down” overall to 11.1%. But its survey ended June 12, weeks before the spike in infections that are causing states such as California, Florida and Texas to backtrack on reopening.

Also, “real-time” indicators such as retail traffic, credit-card purchases, and job listings seem to suggest a weakening economy.

“After recovering rapidly from mid-April through mid-June, the economy has shown signs of sputtering in the past two weeks,” wrote columnist Greg Ip in the Wall Street Journal.

Businesses claimed to have added 4.88 million jobs, but many are laid-off workers called back first and who could be first to be laid off again if states or employers have to repeat shutdowns.

Also, workers on temporary layoffs but still paid aren’t counted as jobless.

The Trump administration bragged about the statistics, but it might be too optimistic, mostly ignoring the pandemic and also the 2.1 million of “new” jobs being in restaurants, bars and hotels, which will be the most vulnerable to any new round of closures.

COVID-19 hasn’t faded nationally. The country on July 5 reported its 27^th straight day of record-high cases, and health experts worry about the lag between infections, hospitalizations and deaths.

As of June 27, 19.2 million Americans were receiving state unemployment benefits, according to a separate weekly government report, and federal data show that 1.4 million sought jobless benefits during that week, and 800,000 sought the extra aid from federal assistance. More than 1 million have filed for state jobless benefits weekly for months; the previous high was 695,000 in a 1982 recession.

“The June employment report showed the economy adding back 4.8 million jobs, following a gain of 2.7 million in May,” wrote economist Dean Baker of the Center for Economic and Policy Research. “This two-month gain leaves the economy down by just under 14.7 million jobs from its pre-pandemic level in February.”

Local and state governments lost 1.9 million jobs in April and May, and June’s net gains were a paltry 32,000. Providing federal aid to state and local governments has bipartisan support, but GOP leaders in the Senate say they don’t plan to address another pandemic-relief bill until late this month.

As to BLS reporting that just 54.6% of adults worked in June, that’s shown in the Employment-Population Ratio report (EPOP). It measures the percentage of Americans who are in the labor force – people who have jobs or are actively looking for work (except active-duty military personnel, the incarcerated or institutionalized). Its peak was 67.3%, in 2000, and it fell to 51.3% in April and 52.8% in May.

That’s different that unemployment figures, which record the percentage of people within the labor force not currently employed.

Together, they gauge economies’ health’ a high employment-population ratio plus a low jobless rate means a strong economy.

We’re not there; the crisis isn’t over.

So, Congress needs to promptly extend its enhanced unemployment assistance as soon as the Senate returns July 20 from its recess, and to renew the $600 checks to independent contractors. And COVID-19 must be fought better to let businesses rebound. Much remains unfinished.

Torsten Slok, chief economist for Deutsche Bank Securities, said, “To get the employment-to-population ratio back to where it was at its peak, we need to create 30 million jobs.”