The United States faces significant long-term economic damage from the coronavirus as lawmakers discuss boosted unemployment benefits amid stubbornly high weekly jobless claims.
More than 1 million Americans have filed new claims for unemployment benefits each week for the past four months. Those figures provide a grim backdrop for the fight unfolding in Washington over whether to extend improved unemployment insurance to millions of job seekers.
Economists say persistently high unemployment claims coupled with the increasing number of permanent job losses are troubling signs for both workers and the economy.
“The main thing we are seeing right now is the scarring of the economy that is happening in real time. We are seeing more people who are permanently unemployed. We are seeing people continue to be laid off, ”said Martha Gimbel, senior manager of economic research at philanthropic investment firm Schmidt Futures.
Gimbel – together with more than 150 other economists – warns that the scarring could be deeper and more damaging if the White House and Congress allow a weekly $ 600 increase in unemployment benefits to expire on July 31. The additional insurance was implemented in late March with the signing of the CARES Law.
“We are concerned that people are evicted. We are concerned that people cannot feed their children. This is not about stimulation. It’s about support, and I think it’s really important to distinguish between those two things, ”he said.
The workforce has recovered approximately 8 million of the more than 20 million jobs lost since March, largely due to workers returning from temporary layoffs.
But approximately 30 million Americans, 11.9 percent of the workforce, were receiving some form of unemployment insurance as of the first week of July. And while millions of suspended workers returned to their jobs in May and June, another 2.9 million workers were permanently laid off during that period.
The unprecedented way in which the pandemic has devastated the economy has also made it harder to measure the total cost of the coronavirus recession.
The emergence of the pandemic forced thousands of companies to close and fire more than 20 million workers for two months. When states eased those restrictions in May and June, many companies were able to reopen, if they had reduced capacity, and bring back the workers they had fired earlier.
“We are seeing business closings and more short-term layoffs due to public health orders, which was not the case in the Great Recession or in previous recessions,” said Elizabeth Pancotti, policy adviser for Employ America, an advocacy group. progressive.
“A lot of what we are seeing is people entering and leaving the unemployment system,” he added.
The unemployment rate in June fell to 11.1 percent from 13.3 percent the previous month and a record post-depression high of 14.7 percent in April. Weekly jobless claims have steadily declined from a peak of 6.8 million in late March to 1.3 million in the second week of July.
But that 1.3 million figure is still almost double the pre-pandemic high of 695,000 set in October 1982, and does not include the more than 920,000 claims filed through the Pandemic Unemployment Assistance Program for concert workers and others who they do not qualify for the traditional system.
A new wave of coronavirus cases has triggered another wave of restrictions and a decrease in consumer activity, particularly in the worst-affected states. The steady increase in COVID-19 cases has weakened the economic outlook for the rest of 2020 and beyond, prompting companies to lay off thousands of workers as they prepare for a long and uncertain path to recovery.
“We have recently seen some signs of some slowdown in activity due to growing concern about the virus,” former Federal Reserve Chairman Ben Bernanke said during a hearing Friday before a House subcommittee.
“So I don’t think we will see such a rapid decline [in unemployment] as we have seen recently, “he added.” Maybe a little lower than where we are now, but not where we would like to be. “
Bernanke’s successor, former Fed chair Janet Yellen
Janet Louise YellenOn The Money: Enhanced Unemployment Insurance Probably Expires During COVID-19 Aid Talks | Trump says he will not issue national mask mandate | Mnuchin: Most affected companies should be able to get second PPP Yellen payment, Bernanke urges Congress to extend increase in unemployment benefits The 12:30 report from The Hill – Presented by Facebook – The public debate on the masks facial increases MORE, he added at the same hearing, that it could take two or three years to bring “unemployment down to levels close to where we were before the pandemic.”
Both Bernanke and Yellen were among the more than 150 economists who urged Congress in a June letter to continue the $ 600 boost to unemployment benefits. Fed President Jerome Powell also warned lawmakers that if they don’t continue to improve unemployment benefits in some way, it could be ruinous for the most vulnerable households.
Economists credit the increase in unemployment benefits and other stimulus measures under the CARES Act with the increase in consumer spending and retail sales in May and June, after sharp falls in March and April. Unemployment experts have also cited the growing weekly claims in Texas, California, Florida and other states affected by coronavirus cases as a cause for alarm.
“We could see some evidence in the July jobs report when it comes out in two weeks of new layoffs due to reconnections, and I would say the August jobs report will probably be worse than that because we will see more increases in the cases.” Pancotti said.
Trump and Republicans are generally opposed to extending the $ 600 raise for fear it will incentivize workers not to return to their jobs. Supporters of the increase counteract that most workers would lose unemployment benefits if they rejected a job offer. They also fear a wave of foreclosures, evictions, and business failures that could occur if household incomes drop in August, as rising cases of viruses prevent the unemployed from finding new jobs.
“Two million people applying for unemployment insurance every week is a crazy state of the world,” said Gimbel.
“If we don’t keep people safe during a crisis that is a true act of God, then real long-term suffering awaits us.”
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