The U.S. job market is still in very bad shape. Just wait until the fiscal time bomb goes off.
Trump touts June jobs report
President Trump on July 2 said the June employment data “proves that our economy is roaring back” as coronavirus cases continued to rise in the United States. (The Washington Post)
Opinion by
Catherine Rampell
Columnist TWP
The U.S. economy added 4.8 million payroll jobs in June, the Bureau of Labor Statistics reported Thursday. That’s terrific news for those newly hired, but there are at least three reasons for the rest of us to hold off on popping the champagne.
First, even with these gains, U.S. payrolls are still deeply in the hole. Second, these official government numbers are based on a snapshot from mid-June, and more recent data suggest the recovery has either stalled or deteriorated since then. And, third, a major fiscal time bomb is about to detonate.
Let’s start with the jobs hole.
You may have a sense that things are still quite bad, given that the unemployment rate remains higher than it ever was during the Great Recession. To help visualize just how far in the red the country is, take a gander at the Scariest Jobs Chart You’ll See All Day. It plots the trajectory of job changes in this recession alongside those from previous postwar downturns (and subsequent recoveries).
How this recession compares to previous ones
Percent change in employment since most recent peak.
Months since the last employment peak
Note: Because employment is a lagging indicator, the dates for these payroll employment trends are not exactly synchronized with the National Bureau of Economic Research’s official business cycle dates.
Sources: Bureau of Labor Statistics, via Haver Analytics
The horizontal axis shows months since the most recent employment peak of a given business cycle. The teal line plots the Great Recession. Until recently, the depth, duration and sluggish recovery from the Great Recession had put all other postwar downturns to shame.
Now look at the red line, which represents the awful situation the country is experiencing.
Things are so much worse than even the Great Recession that the red line almost doesn’t fit on the same chart as the others. It starts with a near-vertical downward drop, followed by a short spike upward.
Again, it’s fantastic that the hiring trend has, in fact, turned upward. But there are still 14.7 million, or about 10 percent, fewer payroll jobs than there were at the start of the pandemic recession. And as you can see, even if job growth continues at what President Trump calls “rocket ship” pace, the economy still has a long way to go before reaching an acceptable altitude — that is, until U.S. payrolls are anywhere near pre-pandemic levels.
There’s also reason to think that our little “rocket ship” might slow down — or perhaps already has. Which brings us to worry No. 2.
Thursday’s jobs report reflects activity in mid-June, because the Bureau of Labor Statistics’ employer survey always refers to the pay period that includes the 12th day of the month.
Mid-June feels like a long time ago. Since then, confirmed coronavirus cases have surged, especially across the Sun Belt. Some states (Florida, Texas, California, among other jurisdictions) have halted or even reversed their reopening plans, especially in the industry that reported the greatest job gains at mid-June: leisure and hospitality, which Thursday’s jobs report showed as contributing about 40 percent of the overall gain in U.S. payroll jobs.
Additionally, other recent, private-industry metrics suggest the recovery may be sputtering.
Foot traffic to businesses, based on cellphone movement patterns compiled by SafeGraph, shows a pickup through the spring, then a plateau or even a slight dip in late June.
The trend is similar for real-time measures of small-business health (businesses open, employees working) provided by Homebase, which offers scheduling software to small businesses.
Same for real-time, private industry data on restaurant reservations, consumer spending, etc.
Federal Reserve officials have expressed concern that economic conditions could get much worse with a renewed spike in infections, according to the minutes of a meeting released on Wednesday. The path of the pandemic aside, other major economic risks loom.
In particular, a fiscal time bomb is about to detonate. Actually, two separate bombs.
Enhanced unemployment benefits are scheduled to expire at the end of July, and Republicans have said that no way, no how will the program be renewed. Some have expressed concerns that the enhanced benefit — a flat $600 federal payment on top of state benefits — might disincentivize work because some workers receive more in benefits than they earned in wages. But that design could be amended.
Additionally, states and localities are going broke. Thanks to covid-19, their tax revenue has plummeted and expenses have gone up. Lucy Dadayan of the Tax Policy Center estimates that the pandemic will reduce state revenue alone by $200 billion (or about 10 percent of pre-pandemic projections) over fiscal 2020 and 2021. Officials from both blue and red states have pleaded for federal help. Unlike most states and municipalities, after all, the feds don’t have to worry about balanced budgets.
While there is bipartisan support in Congress for providing state aid, it hasn’t happened yet. Republican Senate leaders have said they don’t plan to put together the next coronavirus relief bill until the end of July.
Perversely, the gains in Thursday’s jobs report might reduce pressure on policymakers to pass this needed legislation.
This would be foolish. Already, states and localities have laid off about 1.5 million employees since the pandemic began. Unless federal aid comes through soon, huge new public-sector layoffs and service cuts can be expected in the months ahead, followed by knock-on job losses in the private sector.
For a sense of just how dire the outlook remains, lawmakers might consider the Congressional Budget Office’s latest economic forecasts, also released Thursday. The agency projects that, absent any additional fiscal relief, the United States will close out 2020 with an unemployment rate of 10.5 percent — still higher than it ever was during the Great Recession.
Now is not the time for lawmakers, or their constituents, to let down their guard.
