Moneybox

The Economy Is Not Going Back to Normal

Washington will have to try to keep things afloat. Again.

Donald Trump at the podium in the White House briefing room with his arms spread wide. Kudlow and Mnuchin stand at either side of him.
President Donald Trump, with economic adviser Larry Kudlow and Treasury Secretary Steve Mnuchin, discusses the latest jobs numbers at a press conference at the White House on Thursday. Jim Watson/Getty Images

Last week, when another jobs report came out, President Donald Trump held a press conference to crow over it, saying that the jobs numbers proved that “our economy is roaring back, coming back extremely strong.” But “extremely strong” is in the eye of the beholder. On Monday’s episode of What Next, Slate economics writer Jordan Weissmann gave us a reality check, explaining what those numbers really mean and how Washington is trying to figure out a way to keep America afloat as the coronavirus surges. Again. Our conversation has been edited and condensed for clarity.

Mary Harris: Talk a bit about those jobs numbers.

Jordan Weissmann: The economy is sort of a strange story right now. And it’s a little bit confusing if you’re watching along at home and not paying super close attention. There have been now two jobs reports in a row that were pretty good. Last week, for instance, they reported that there were 4.8 million jobs created in June.

And that’s a record number, right? 

Record with an asterisk because we also had a record fall. The unemployment rate fell to about 11 percent.

There is an important point to make here, which is that back in March, economists were talking about unemployment rates at 20 percent. So if you’re looking at unemployment, that’s half of that—that does seem positive.

We did not get the worst-case scenario. We do have 31 million people on the unemployment rolls right now. It’s not good. These stats that we’re looking at and that Donald Trump is celebrating are very backward-looking. Basically what they said is that between the middle of May and the middle of June, we created about 4.8 million jobs on net. The problem is that by the middle of June and then toward the end of June, things started to really tail off.

And then Texas shut down.

All these states had these massive flare-ups said, Oh, crap, we have to reclose things. And so, what we saw in this jobs report was that, yes, if you completely ignore public health, you can rehire a bunch of people and try to restart the economy. But eventually the virus becomes this natural barrier to recovery. A lot of people warned this was going to happen. It should be crystal clear at this point to everybody that life is not going to go back to normal. And as a result, the economy is not going back to normal, no matter how hard Republicans wish it would.

Can we talk about what you can learn from this jobs report? Like what kind of jobs came back so quickly?

A lot of the jobs that came back—and this is actually a little bit worrying—were in hospitality and food and bars and restaurants. About 2 million total.

And that’s worrying because these are the most vulnerable jobs?

Right, it’s not clear how many more of those can come back. It’s not clear how many of those might disappear again because they have to reclose. It’s not obvious that you can sustain that. A lot of the job growth was in this sector that may just have a natural limit because you cannot safely reopen all of these establishments. That’s something to be concerned about.

The economy seems pretty fragile right now. But if I’m remembering things right, it’s July. And isn’t that when unemployment benefits were set to run out?

Yes, the CARES Act, which was the giant relief bill that Congress passed in March, created the $600-per-week unemployment benefits, one of the central pieces of the relief effort. Those exist through July 31. After that, they expire. We go back to normal unemployment benefits, which often cover less than half of someone’s normal income. People are worried about what’s going to happen at that point because there are so many people who probably can’t go back to their jobs because it’s just not safe. What happens to the economy and what happens to those families when they have their income cut in half, maybe more? When these benefits expire, Democrats want to renew them. Republicans are dead set against reupping the $600. This is going to be one of the big clashes this month as Congress tries to negotiate yet another stimulus or relief bill.

The White House seems open to a second round of checks to every American the same way they did a few months back. Will that be enough?

I don’t think so. I mean, it’s great. It’s a nice way to continue helping people. For lower-income households, they were really a lifesaver. But you need to get aid to the 31 million people who are out of work. You can’t cut them off cold turkey and expect they’re just going to find a job.

You wrote about how Chuck Schumer has this new proposal that would deal with unemployment insurance in a different way. Can you explain it a little bit?

This is the automatic stabilizer or the automatic trigger idea that a lot of people in the Democratic Party and on the left have been talking about for a long while. The idea is that you tie the amount of unemployment benefits to the unemployment rate. You extend the current benefits past July and then as the unemployment rate falls, then the amount of money available through unemployment benefits also falls so that you wean the country off them. The idea is to phase it down as the unemployment rate declines so that you’re not kicking the crutches out of the economy before it’s ready to run. You’re gradually rehabbing it.

It makes a kind of sense, because it takes the politics out of it to a certain extent. It’s not like you’re setting an arbitrary time deadline to renegotiate. You’re saying we’re going to keep this going until we don’t need it as much anymore.

That just kind of makes common sense. That’s how you would ideally run a social safety net. You don’t have arbitrary deadlines and things expire. You have it until you need it or don’t need it anymore. The idea is that if you negotiate a series of automatic triggers, you don’t have to worry about that anymore.

It also represents an advance in the way Democrats are looking at the social safety net and thinking about how to deal with recessions more generally, that we should have automatic programs that kick into place to deal with economic catastrophe rather than having to negotiate a new package every single time.

This plan, it makes sense when you have the conversation we’re having right now where we talk about how this coronavirus situation is so fluid. States are opening. States are then closing. People are going back to work, and then they’re getting laid off or losing work again. What’s the Republican opposition to this plan?

I haven’t seen their response yet to the automatic stabilizer plan. But more broadly, they believe that generous unemployment benefits are going to discourage people from returning to work, going to make it more difficult for businesses to rehire, in part because some workers are earning more from these benefits than they were at their old jobs. But it’s a little hard to take that argument seriously

Why?

One, we obviously don’t want everyone going back to work right now. Look what’s happened with the outbreak.

Two, these benefits existed in May and June when we added all these jobs back. Donald Trump was touting these record jobs reports and people were going back to work when they still could theoretically be collecting the $600. There’s just no evidence that these benefits are actually stopping large numbers of employers from finding help when they need it.

What are the chances you give, though, for this Chuck Schumer idea of automatic stabilizers actually getting through Congress?

I don’t know. … I hope it does.

Here’s my worry, which is even if this Schumer plan passes, will it be enough? Because isn’t the unemployment system a wreck right now?

It was a wreck early on. But my sense is it’s working better now just because the initial crush is past. There are still people who are probably waiting for their benefits at this point. I don’t want to pretend that it’s going 100 percent smoothly.

The bigger question, rather than whether that system will continue to function, is just what else is going to be in the next recovery package. Like, how much aid to states will there be? Will there be enough money for schools so they can reopen schools safely? Are they going to do another round of checks? The outlines of it are still a little bit fuzzy. And we haven’t really seen the sides begin to negotiate hardcore.

That said, there was one encouraging moment during Trump’s jobs day press conference where Treasury Secretary Steve Mnuchin, the main negotiator for the administration, was upbeat about the numbers, but he said our job is not done until everyone has gone back to work. He seems to understand that the economy is not going to heal on its own entirely and that there needs to be another major effort to shore things up. So that seemed promising.

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