Moneybox

We’re Failing to Rescue the Economy

Volunteers prepare bags of groceries for distribution, walking among stacks and stacks of food boxes
A drive-thru emergency food distribution site in Las Vegas.
David Becker/AFP via Getty Images

America’s economic response to the coronavirus crisis does not appear to be going very well.

Consider what the CARES Act, which Congress passed in late March, was actually designed to accomplish. First, it tried to limit layoffs by offering businesses loans and grants so they could keep workers on payroll during the pandemic lockdown.

Second, the legislation promised to give people financial help, especially if they lost their jobs. There were checks for the middle class, as well as generous new federal unemployment benefits of $600 per week.

We are only partially achieving either of these goals—at best. Just over a month has gone by since the relief bill passed, and millions of people are still ostensibly losing their jobs each week. Meanwhile, many of the unemployed still haven’t gotten any aid, in part because the creaky systems that underpin our safety net weren’t built to work this fast. We don’t know exactly how bad the situation is, because the crisis is developing quicker than our official economic data can track it, and some of the numbers we have are a bit open to interpretation. There are also some faint glimmers of hope in the numbers we do have. But overall, the available facts are not reassuring.

Start with the layoffs. Americans filed 3.8 million unemployment claims last week, the Department of Labor reported Thursday, pushing the grand total to more than 30 million over the course of this crisis. Mercifully, the number of new claims has fallen each week since peaking above 6.8 million at the end of March. But even so, millions of people still appear to be getting laid off or furloughed weeks after the government revved up efforts like the Paycheck Protection Program that were supposed to prevent that from happening.

It is possible that fewer Americans have lost work than the unemployment claims make it seem, because many people have been required to apply for benefits more than once. In some states, workers who were not traditionally eligible for unemployment insurance but were made so by the CARES Act—like the self-employed—have to file for state unemployment first, get denied, then file again for federal help. That bureaucratic merry-go-round could be inflating the stats a bit. (Just to make things more confusing, I’m told that the applications for federal unemployment benefits weren’t supposed to be included in the regular state claims data this week, yet might have been anyway. Sigh.)

But if anything, it seems more likely that the unemployment insurance numbers are actually understating the extent of layoffs. First, there are a lot of people out there who have tried to file but haven’t been able to thanks to crashing websites and overwhelmed phone lines. A survey by the Economic Policy Institute found that as of mid-April, for every 10 people who said they’d successfully filed an unemployment claim, “three to four additional people tried to apply but could not get through the system to make a claim.” All of those stories you’ve read (or experienced firsthand) about people calling up their state unemployment office hundreds of times to no avail? They’re real, and they may be hiding the true depth of our crisis.

Second, economists Alexander Bick of Arizona State University and Adam Blandin of Virginia Commonwealth University have estimated that the U.S. actually shed 34 million jobs by mid-April. They did so based on a survey designed to replicate the official unemployment report that the Department of Labor releases each month, albeit with a smaller sample (the government’s version isn’t due out until next week). In short, there’s a good chance things really are at least as bad as they look, and we could be facing an unemployment rate of 16 to 18 percent.

That wouldn’t necessarily be a disaster right now, if people were promptly receiving the aid Congress set aside to help them pay for their basic expenses while the economy is in deep freeze. But there are good reasons to worry that they are not.

The unfortunate truth is that, right now, we can’t say for sure how many people have actually gotten an unemployment check because the data just aren’t up to date. But the information we have doesn’t look great. Based on the Department of Labor’s detailed monthly financial stats, we know that states received 11.7 million initial jobless claims in March, but only sent 1.67 million people their first payment. Based on the department’s less detailed weekly releases that now ruin everybody’s Thursday, we know that by April 18 states had reported just under 18 million “continuing claims” from individuals who had at least been approved for benefits but had not necessarily received a check yet. That’s out of the 25.6 million initial unemployment claims that had been filed at that point. It’s hard to know exactly how many people are still waiting for their money, but a fair guess is “a lot.”

As for the direct payments, the Trump-signed checks in the mail? They’ve been a bit slow to arrive, at least for anybody who didn’t have direct deposit information on hand with the IRS. As of April 28, the agency reported that it had delivered 89.5 million payments out of more than 150 million that will need to be sent out—and which many families still won’t receive for months.

There are some glimmers of hope in the data. One interesting development is that the number of net new continuing unemployment claims—again, the people who’ve been approved for benefits and may be receiving them already—has been shrinking in the past few weeks. That suggests state unemployment agencies are either working through their backlog of applications or that people are being rehired out of unemployment back to their old jobs.

It’s also possible that a lot of people who are waiting on unemployment have already gotten their relief payment from the IRS and that’s helping to tide them over. Likewise, some people who still haven’t received a check might have been approved for those $600-a-week jobless benefits already. Congress threw a lot of money at the wall. And it may be that for most people, some of it has stuck. Things could get better in the coming weeks as states and the feds continue ironing out the administrative kinks in these programs.

Overall, though, it still looks like our pandemic response has failed to prevent a historically rapid rise in unemployment or promptly get cash to a lot of the people who need it immediately—or both. We’re in a crisis. And we’re barely even muddling through.