SAN FRANCISCO (Reuters) – As the United States prepares for presidential, congressional and local elections in November, the country’s economy is also on a roller coaster.
FILE PHOTO: Information signs are seen at the Destiny USA shopping center during the reopening, as restrictions on coronavirus disease (COVID-19) are eased in Syracuse, New York, USA, July 10, 2020 REUTERS / Maranie Staab / File Photo
Attempts to halt the spread of the coronavirus in March left tens of millions out of work, cut spending and slowed factory production.
As many states began to relax their blockades in May, some of that data was reversed: Jobs began to return, factories did more, and households bought them. With some states closing deals again and worried shoppers and diners in the midst of a recent resurgence of infections, those gains could be reversed.
Amidst the turmoil, politicians and analysts of all stripes take hold of figures who support their particular narrative (here), while ignoring others who do not.
Earlier this month, President Donald Trump said the record increase in jobs in June “proves our economy is rebounding.”
House Speaker Nancy Pelosi said unemployment figures show that Congress needs to pass a new coronavirus relief bill that gives people money, or “the economy will only worsen.”
Who is right? Here are some guidelines for judging the health of the United States economy for yourself in the months ahead.
IT’S A RECORD, YOU SAY?
A record 4.8 million jobs were created in June, the latest monthly report by the Department of Labor showed. That’s above the 2.7 million reported jobs created in May.
Sounds pretty good.But after the COVID-19 related closings, the rise in May and June is a bit like falling through a 22-foot hole, and then climbing a seven-and-a-half-foot ladder at the bottom.
In this case, there were 152.5 million American workers employed in February before the coronavirus hit, that number is now 137.8 million, even after two months of increases.
So be careful with the ‘records’. The numbers have been great in both directions, and probably will be for a while. Instead, take a look at how the current situation compares to the relatively healthy pre-COVID economy:
HOW MANY ARE UNEMPLOYED?
First-time weekly claims for unemployment insurance, or the number of new people applying for unemployment benefits, have also decreased in recent weeks. After peaking at $ 6,867 million in late March, they hit $ 1,314 million for the week ending July 4.
Still, claims are twice as high as at the height of the Great Recession, and more than six times the 2019 average of just over 200,000. See here for a historical comparison.
Just as important is how many people stay on unemployment benefits from week to week. These continued, registered jobless claims totaled 18 million in the week ending June 27.
NO, REALLY, HOW MANY ARE UNEMPLOYED?
However, continued data from previous unemployment claims does not show the complete picture.
A new pandemic unemployment assistance program provides unemployment benefits to contract workers, such as carpool drivers. Such workers would not normally qualify for help between concerts, but were eligible due to the magnitude of the economic disruption.
Adding to the nearly 15 million people who receive these and other special benefits, a staggering 32.9 million US residents were receiving some form of unemployment assistance as of June 20, the most recent date for which report this data. (www.dol.gov/ui/data.pdf)
Meanwhile, the official unemployment rate fell in June to 11.1%, from 13.3% in May. Although clearly an improvement, it still beats the worst reading during the Great 10% Recession.
The government says it is almost certainly an insufficient count: if the job status were classified correctly, unemployment in June would have been closer to 12.3%, down from 16.4% in May. This count is likely to decrease as time passes.
IT’S HARD TO ADJUST
Another thing to keep in mind is that some data is adjusted for seasonal factors, such as holidays and seasonal weather patterns, and others are not. Sometimes when the data doesn’t add up, that’s the reason.
Then there is annualized data.
Every three months, the United States government publishes an initial estimate of how fast the economy is growing, or, as in the current crisis, whether it is shrinking, compared to the previous three months.
Because the public health response to the coronavirus was to halt much of the daily trade, GDP in the April-June quarter is expected to decline more than 30% annually, far exceeding the previous record, a 10% drop in the first quarter of 1958.
This is clearly a sign that the economy is distressed, but it does not mean that the United States’ gross domestic product, which was $ 21.4 trillion in 2019, has shrunk to a third of its previous size. Instead, it is on track to decline as long as it continues to contract at the same rate for a full year.
That is unlikely. Instead, most economists forecast record third-quarter GDP growth of 20% or more. The first estimate for second quarter growth will be released on July 30; The initial third quarter report will be released on October 29, just days before the election.
Still, the economy is likely to end in 2020 smaller than it started, perhaps by about 6.5%, according to estimates by Federal Reserve policy makers.
Ann Saphir Report; Edited by Heather Timmons, Dan Burns and Andrea Ricci
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