There has been speculation about the likelihood of an extension of federal unemployment benefits, especially in light of the pending expiration on July 31. But a major domino fell in the direction of an extension of benefits with the July 16 release of initial unemployment claims.
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The most recent figures confirm that the unemployment situation remains serious. That being the case, arguing against an extension of federal unemployment benefits is fast becoming a non-politician.
Latest employment numbers from the US Department of Labor.
The latest DOL report, released on July 16, shows initial jobless claims at 1.3 million. That’s just 10,000 claims of $ 1.31 million the week before. More than anything else, the decline in initial earnings is confirming a status quo on the labor front. The reviews, which are common with employment numbers, may even tell an even less optimistic story.
Either way, the most that can be gleaned from recent employment figures is a stagnant labor market. That doesn’t leave politicians much room to breathe as the July 31 expiration date on federal unemployment benefits approaches.
A bright spot in the most recent employment report is that continued jobless claims fell to 17.34 million from 17.76 million the week before. That resulted in a decrease in the overall unemployment rate, from 12.2% to 11.9%.
Still, both the unemployment rate and the number of continuing unemployment claims confirm the clear recessionary state of the economy and the labor market. Even with “only” 1.3 million initial unemployment claims, the number is still double the peak of claims during the Great Recession, and more than six times the average of 200,000 per week before the coronavirus.
The biggest picture of the job that may be hiding under the latest numbers
Even improvements in the unemployment rate and the number of continuing claims may be hiding something far more sinister.
Millions of workers have returned to their jobs since mid-May as the economic shutdown across the country lifted. The reemployment of these workers was mainly because they were simply furloughed and recalled that the economy began to reopen.
But initial jobless claims, despite being considerably lower than they were at the peak of COVID’s closure, have been taking place despite the reopening of the economy.
There is an excellent possibility that the layoffs that have taken place in the last few weeks are permanent, while those that occurred earlier in the coronavirus process were temporary.
If so, the continued high number of initial jobless claims points to continued stagnation.
“Most of June’s job gains were not newly created roles, but rather companies that rehired employees who had previously been laid off and brought in,” said Jack Kelly, Forbes Senior Contributor. “The data, terrible as they are, do not tell the whole story. We have seen overwhelming reports that the economy continues to fall apart and is unlikely to improve anytime soon. ”
There is also evidence that the employment situation may be worse than the standard figures presented by the Department of Labor.
“About 1.3 million Americans have applied for unemployment benefits for the first time last week, according to the United States Department of Labor,” continues Kelly. “If you add the 1 million pandemic claims filed by the concert economy and related workers, we find the alarming figure of 2.3 million Americans who sought unemployment assistance last week.”
The resurgence of COVID-19 cases and the impact on employment
In the context of the economy and the labor market, but having a profound effect on both, the cases of COVID-19 are re-emerging. While fortunately the number of deaths from the virus has dropped dramatically, the new cases are at their peak.
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According to the John Hopkins Coronavirus Resource Center, the number of new infections nationwide regularly exceeds 60,000 per day. That’s almost double the more than 30,000 daily cases reported during what was thought to be the peak of the coronavirus in late April and early May.
At this point, it is impossible to separate the coronavirus trajectory from the performance of the economy and the labor market. And since the latest recovery in new COVID-19 cases only started in mid-June, the full effect of the latest phase of the virus on unemployment has yet to be fully felt.
If that’s the case, the best unemployment news may well be behind us. Not only are some states now withdrawing reopening plans, but many companies are limiting operations, even apart from state-imposed regulations.
“Some major retailers and attractions are also closing on their own in the absence of renewed local restrictions,” Forbes editors Sarah Hansen and Lisette Voytko reported. “Disney
In the context of the recent increase in COVID-19 cases, consumers themselves are likely to limit spending. Some may do so for fear of economic uncertainty. But for others it will be a by-product of spending less doing less. Either way, reducing spending will have a dampening effect on the economy. And that will result in a flat job or worse
The impending child care crisis
Even apart from the current state of employment, there is an “X” factor looming just on the horizon. The reopening of schools.
There are intense debates throughout the United States, but especially in the southern level of the country, where new virus infections are increasing more rapidly.
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A second shutdown of the United States economy is highly unlikely, due to the economic consequences already experienced. But that is creating another dilemma for working parents.
Although President Trump is ordering schools across the country to reopen in the fall, it is not clear that everything will go. And even if they do, they can still adopt a reduced version of support.
“California counties in Los Angeles and San Diego announced Monday that their schools will remain remote only this fall,” reports Forbes writer Alison Durkee. “(New) Governor Andrew Cuomo revealed new data thresholds to determine the reopening of schools, as states and cities openly rebuke President Donald Trump’s push to resume full-time, in-person learning in the fall. “
Online school now vs. last spring
The school situation is fundamentally different now than when the coronavirus first hit in the spring. At that time, the closure of the schools coincided with the economic closure. With parents and students at home at the same time, childcare was not an issue.
But with the prospect of schools continuing to operate remotely or on reduced hours in the fall, many parents face a child care crisis. What adaptations will be made to care for young children while their parents are back at work?
There are no clear answers, which puts many parents in an awkward position to choose between working and caring for their children. The built-in flexibility that was evident last spring is scarce in the new school year.
Admittedly, the issue of reopening / childcare does not have a direct impact on unemployment or the extent of federal unemployment benefits. But it is contributing to the level of stress that working parents of young children experience. That is the kind of dilemma that can easily be extended to the political arena. And that can translate into an additional incentive for politicians to act quickly on an extension of unemployment, as well as a second stimulus payment.
Indecision in Washington and the choice of fast approach
In a context of crisis and uncertainty, the powers that be in Washington continue to debate, even if only at a distance.
For their part, Democrats have already made clear their intention to extend the federal unemployment benefit of $ 600 per week beyond the expiration date of July 31 stipulated in the CARES Act. This was included in the HEROES Act passed in the Democrat-controlled House of Representatives in May. That bill includes not only an extension of federal unemployment to $ 600 per week, but also a new round of stimulus payments of $ 1,200 per person, and up to $ 6,000 for a family of five.
Although the Republican-controlled Senate continues to resist the specifics of the HEROES Act, they support alternatives. However, those alternatives generally require less generous benefit payments.
Treasury Secretary Steven Mnuchin has recorded that the Trump Administration wants to limit continuing benefits to no more than the recipient’s previous earned income. This sounds like a reasonable counterproposal, but it is not without its problems.
“Many are concerned that suspending the additional unemployment benefit would push many Americans into a financial crisis,” writes Renee Morad, a Forbes contributor. “This comes at a particularly challenging time when two dozen states pause or reverse their reopening plans in an effort to flatten the curve, given the recent surge in coronavirus cases.”
Undoubtedly, the payment of unemployment benefits that exceed a worker’s previous earnings has been too generous. But at the same time, it has helped support millions of households, as well as minimizing the impact of a seriously distressed economy.
As reasonable as limiting unemployment benefits to no more than past earnings seems, don’t be surprised if the final unemployment spread doesn’t come close to the current format of $ 600 per week.
Summary
Although the July 31 expiration date on federal unemployment benefits is fast approaching, with no clear decision in sight, that situation could change in no time. Congress moved very quickly to pass the CARES Act in March, which was the beginning of the federal unemployment benefit program.
This time, the federal unemployment benefit is already established. Legislation that took weeks to come true in the early days of COVID-19 could be expanded in a matter of days. And unlikely as it may seem at the moment, it should come as no surprise if the President himself extends the current executive-mandated benefit in the final days of July. That can be done with minimal political consequence in the name of giving Congress more time to work out a more permanent option.
That is the result I hope for, despite the fact that time is shortening rapidly.
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