On The Money: Breaking down the June jobs report | The biggest threats facing the recovery | What will the next stimulus bill include?
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Breaking down June’s jobs report: With the Fourth of July getting off to an early start, On The Money is taking a closer look at the June jobs report as we settle into what will hopefully be a quiet weekend on the economic front. By now, you probably know that the U.S. added 4.8 million jobs last month and saw the unemployment rate drop to 11.1 percent from 13.3 percent in May. But the headline numbers tell us a lot more about where we’ve already been than where we’re actually going, so we’re going dig in a little deeper to show you what could shape Washington’s response to the economic and health crises.
Also, if you’re reading this before heading out to a barbeque or other gathering for Independence Day and wish you were looking at better news, a great way to make that happen next month is to wear a mask and keep six feet apart from people other than those in your household. We’ll get into more about that later.
- 4.8 million: That’s not only the number of jobs added by the U.S. economy in June, but also the total number of workers who are no longer on furlough or another form of temporary layoff. While we don’t know for sure how many of the new jobs added are simply laid-off workers coming back to reopened workplaces, economists believe that it’s the primary driver of the ongoing labor market recovery.
- 2.1 million: The number of jobs added by the leisure and hospitality industry in June, which is roughly two-fifths of the total monthly gain. Like in May, the reopening of restaurants, bars, hotels and some entertainment venues brought millions of furloughed workers back to their jobs.
- 14.7 million: The number of jobs lost since March that have yet to be regained as the economy recovers. While the U.S. has seen back-to-back months of record job gains, they follow two months that wiped out nearly 10 years of employment growth.
- 588,000: The number of U.S. workers who permanently lost their jobs in June, increasing to 2.9 million total. Unlike the roughly 10 million U.S. workers who report being temporarily laid-off, these folks are on the hunt for a new job — perhaps in a new industry — in a brutal labor market. This represents long-term damage to the economy.
“The June employment report is more backward than forward looking, as layoffs have already picked up again. This summer will be a struggle for recovery in employment.” — Diane Swonk, chief economist at Grant Thornton.
The good news:
- The federal response is working: It turns out that pumping $3 trillion in fiscal support into a collapsing economy with trillions more in monetary stimulus and emergency loans from the Federal Reserve seems to help. Millions of workers coming back to their pre-pandemic jobs requires businesses to survive long enough for that to happen, which economists attribute to unprecedented fiscal stimulus that helped give owners a temporary lift and customers enough cash to supplement weaker demand.
- The rebound was more equitable: May’s jobs report included a rise Black unemployment. In June, Black unemployment fell from 16.8 percent in May to 15.4 percent. Even so, unemployment for Black men rose from 15.5 percent to 16.3 percent, while unemployment for Black women — who are overrepresented in essential jobs — dropped from 16.5 percent to 14.0 percent.
“Two months of record jobs gains offer hope for recovery — the American economy is showing signs of getting back on track. Americans know federal support can’t sustain livelihoods indefinitely and have shown their willingness to return to work, restaurants, and stores.” — Rachel Greszler, research fellow at the conservative Heritage Foundation.
The bad news:
- Layoffs are still happening and getting broader: Along with 588,000 permanent job losses, initial weekly claims for unemployment benefits have averaged nearly 1.5 million throughout the month. Some of that is due to insane backlogs in some states, but economists are growing increasingly concerned about the persistently high level of new unemployment claims.
- Continuing claims are still staggeringly high: More than 31 million Americans claimed unemployment benefits in some form in the week ending on June 13, the same week of the job report surveys. That figure rose by more than 900,000 in just one week.
- This report may already be irrelevant: The monthly jobs report is calculated using the results of two surveys, one of households and another of businesses, that are conducted the week including the 12th of the month. That means that the June report does not include the impact of the surge in coronavirus cases that started soon after the survey period that has already slowed down the recovery, according to recent data.
“People don’t just stop going out because of lockdowns and stay home orders. They stop going out because of the virus risk itself. That’s been the main driver of the slowdown in economic activity.” — Adam Ozimek, chief economist at Upwork, in a Thursday interview.
Four big threats:
- The second wave of COVID-19: Economists broadly agree that the single biggest threat to the US economy is the resurgence of the virus. More coronavirus cases means fewer businesses open and fewer people employed with far more lockdowns and sick people. A resurgence of COVID-19 cases was the Federal Reserve’s main fear in the start of June, according to minutes from its June 9-10 policy meeting, and several officials voiced concerns it could cause a deeper, more damaging recession.
- The fiscal cliff: Much of the federal government’s fiscal response to the pandemic is set to wash out of the economy when the $600 boost to unemployment benefits expires on July 31. The jobless benefit increase is one of the most politically polarizing aspects of the economic rescue approved in March, but economists, including Fed Chairman Jerome Powell, say something will need to replace it to prevent foreclosures, evictions and other tragedies that could cripple the economy for much longer if the virus persists.
- Looming financial threats: The financial system has remained sturdy through the crisis, thanks in part to support from the Fed and the promise of limitless liquidity through asset purchases and emergency loans. But the Fed alone can’t plug every potential crack in the financial system, including the growing turmoil in the commercial mortgage sector.
- School is still out: Closed schools aren’t just driving parents insane. While some have been able to work from home while watching after their children, others don’t have jobs that can accommodate telework and may be forced to stay home for long stretches to watch after their kids.
“The possibility of a ‘v-shaped’ recovery at this point is all but wishful thinking. This morning’s jobs report reflects the resumption of many business activities but a true recovery cannot begin until the virus is mostly under control, a reality that seems more distant with each passing day.” — Shai Akabas, director of economic policy at the Bipartisan Policy Center
Looking ahead: The fight over the next stimulus bill
Lawmakers will be home for most of July and won’t take up formal negotiations over another round of economic and medical response spending until around July 20.
The strong headline numbers give some vindication to Republicans who prefer a smaller, targeted measure that focuses on bringing Americans back to work and targets aid to the individuals and industries struggling the most.
But Democrats warned that Trump and lawmakers cannot be complacent and ignore the growing threats and deepening underlying damage to the economy.
With the battle lines drawn, here are the seven big questions facing lawmakers as they seek a bipartisan deal on another coronavirus relief bill.
- What happens to enhanced unemployment benefits? Democrats insist on extending the $600 boost for as long as the virus persists, but Republicans have ruled that out. Alternatives include reducing the boost to half or a quarter of its current size, converting it to a back-to-work bonus, or tailoring it to state unemployment levels.
“They’ve done a significant job of simulating household incomes and making sure that household incomes don’t fall off the cliff,” Ozimek said. “Even if all we’re doing is extending. I think that’s the better way to do it, rather than let it lapse.”
- How big and broad will the next direct stimulus checks be? Trump and Democrats have voiced support for another round of direct stimulus checks, though Republicans have expressed less enthusiasm. Another round may include smaller amounts or lower income limits to cull the spending.
- How much state and local aid gets included? States are in the process of making difficult budget cuts as they brace for soaring pandemic-related costs and sharp declines in tax revenue. Democrats insist that any new stimulus bill must include funding to prevent local governments from cutting essential services and laying off millions of workers.
- How strong will the liability shield be? Republicans are prioritizing the inclusion of a legal shield for businesses that will protect them from lawsuits related to spreading the virus as long as they take strong enough measures to avoid it.
- Will there be relief for tenants and homeowners facing eviction and foreclosure? Federal housing regulators have extended moratoria on evictions and foreclosures from federally-backed homes. But millions of Americans are facing homelessness without further support from the federal government or leniency from lenders and landlords.
- How much worse will the health situation get? If the surges we see across the South and Sun Belt get substantially worse, it’s likely that the economy will follow suit. That could drastically change the dynamic of negotiations and force lawmakers to find common ground quicker than they would otherwise.
“This is not the time for a victory lap. We need to prepare for what we know is in the pipeline, which is not pretty,” Swonk said.