- Postal workers are twice as likely to be military veterans as nonpostal workers, because veterans benefit from preferential hiring in federal jobs and many have skills sought by the Postal Service. One in five postal workers is Black, nearly double Black workers’ share of the nonpostal workforce.
- Postmaster Louis DeJoy’s recent service cuts, such as eliminating overtime and late trips, leaving mail to be delivered the next day, could harm the integrity of the November elections, which will rely heavily on mail voting.
- Rival private services like FedEx and UPS will likely gain customers from these cuts, which affect service. The beneficiaries of DeJoy’s actions will likely include low-wage “worksharing” companies that do work outsourced by the Postal Service, such as presorting and transporting bulk mail closer to its destination.
- Whereas federal law requires federal contractors in the construction and related industries to pay workers the prevailing wage—usually the area’s union wage—nothing prevents the Postal Service from contracting with companies whose only competitive advantage is paying low wages—often as a result of union-busting.
- Since the Postal Service is required to rebate the full cost savings from outsourcing to the companies doing the work, “worksharing” doesn’t even benefit the Postal Service—but workers definitely lose out.
On June 15, Trump appointed Louis DeJoy, a North Carolina businessman and Republican fundraiser, as the new Postmaster General. DeJoy has wasted no time in ordering major changes to how the United States Postal Service operates. Many have noted that the service cuts he has implemented, such as eliminating overtime and late trips, leaving mail to be delivered the next day, could harm the integrity of the November elections, which will rely heavily on mail voting, due to the pandemic. The slowdown also seems aimed at pleasing President Trump, who makes no secret of his dislike of the Postal Service, which he believes is undercharging Amazon for deliveries. Trump has also lashed out at the Washington Post, owned by Amazon CEO Jeff Bezos, for its news coverage of his administration.
DeJoy, of course, denies that he’s deliberately sabotaging the Postal Service at the behest of the president, claiming service cuts are necessary to keep the Postal Service afloat. Though social distancing measures have boosted online orders during the pandemic, the crisis has reduced the volume of paper mail, which still accounts for about two-thirds of Postal Service revenues. Since the Postal Service is self-funded and has high fixed costs associated with daily delivery and maintaining post offices, it’s an obvious candidate for the same pandemic relief offered to airlines and other businesses affected by the suspension of much economic activity. But the president and Republican-controlled Senate have resisted helping the Postal Service, not just refusing to agree to relief funds included in a House-passed bill, but even holding hostage a loan to the Postal Service in the CARES Act that was signed into law by the president.
After historically fast job growth in May and June, the jobs report for July is sure to disappoint. Because so many jobs were lost in March and April, the economy remains 14.7 million jobs short of where it was in February, and a full recovery—even with rapid growth—is many months away. As COVID-19 has spread rapidly throughout the country, various other data released since the reference period in mid-June suggest—at best—a stalled recovery. At worst, we could see job losses in July. Whichever is the case, it is clear that the bounceback in May and June is over and that the mammoth jobs gap will take years to claw back unless policy becomes much better on both the public health and economic fronts.
In this preview post, I’m going to take you on a brief foray into the data that predict a very disappointing economic performance for this week’s jobs report. First, let’s start with the weekly unemployment insurance data. As of mid-July, 34.3 million workers—or about 20% of the pre-pandemic workforce—were either on unemployment benefits or had applied and were waiting to see if they would get benefits. Although the continuation of record high levels of unemployment insurance may include some pent-up demand from the difficulty of accessing the system, there has been no measurable improvement in these unemployment insurance numbers in weeks.
Unemployment insurance claims remain historically high: Congress must reinstate the extra $600 immediately
Last week 1.6 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 984,000 applied for regular state unemployment insurance (not seasonally adjusted), and 656,000 applied for Pandemic Unemployment Assistance (PUA). Some headlines this morning are saying there were 1.2 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire. Last week is the first week of unemployment in this pandemic that recipients will not get the extra $600 payment. That means people on UI benefits who lost their job during a global pandemic are now are forced to get by on around 40% of their pre-virus earnings, causing enormous pain.
Republicans in the Senate are proposing to (essentially) replace the $600 with a $200 weekly payment. That $400 cut in benefits is not just cruel, it’s terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. The spending made possible by the $400 that the Senate wants to cut is supporting 3.4 million jobs. If you cut the $400, you cut those jobs. The map in Figure A shows the number of jobs that will be lost in each state if the extra $600 unemployment benefit is cut to $200.
UI claims and GDP growth are historically bad: Now is not the time to cut benefits that are supporting jobs
Last week 2 million workers applied for unemployment insurance (UI) benefits. Breaking that down: 1.2 million applied for regular state unemployment insurance (not seasonally adjusted) and 830,000 applied for Pandemic Unemployment Assistance (PUA). Many headlines this morning are saying there were 1.4 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program that is serving millions of workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data, which is distorted right now because of the way the Department of Labor (DOL) does seasonal adjustments.
Last week was the 19th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. If you restrict this comparison just to regular state claims—because we didn’t have PUA during the Great Recession—this is the 19th week in a row that claims are more than 1.25 times the worst week of the Great Recession.
Republicans in the Senate just allowed the across-the-board $600 increase in weekly UI benefits to expire. They are proposing to (essentially) replace it with a $200 weekly payment. That $400 cut in benefits is not just cruel, it’s terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. The spending made possible by the $400 that the Senate wants to cut is supporting 3.4 million jobs. If you cut the $400, you cut those jobs. This map shows the number of jobs that will be lost in each state if the extra $600 unemployment benefit is cut to $200.
State and local governments have lost 1.5 million jobs since February: Federal aid to states and localities is necessary for a strong economic recovery
June’s national jobs report from the Bureau of Labor Statistics (BLS) showed that there was a 4.8 million increase in jobs, after many states reopened their economies prematurely and accelerated the spread of COVID-19. Despite this uptick in employment, there are still 14.7 million fewer jobs than before the pandemic hit. Of these losses, 1.5 million were in state and local government—a sector that disproportionately employs women and Black workers. In mid-July, BLS released their June state-level jobs report, allowing us to take a closer look at these public-sector losses across the country.
Figure A displays the percent and level change in state and local government employment and private-sector jobs over the course of this recession. In every state and the District of Columbia, with the exception of Tennessee, state and local government employment has fallen since the pandemic took hold. In nine states, more than one in 10 state and local government jobs have been lost since February: Wisconsin (-12.3%), Massachusetts (-11.9%), Connecticut (-11.4%), South Dakota (-11.3%), Hawaii (-10.8%), Minnesota (-10.6%), Illinois (-10.5%), Maine (-10.5%), and Kentucky (-10.2%). Meanwhile, California and Texas have experienced the most public-sector job losses since February: 229,000 (-9.6%) and 112,100 (-6.3%), respectively. Table 1, at the end of this post, displays the state and local employment changes from this map as well as the employment levels in February and June 2020.
These devastating job losses follow a slow and weak recovery for the state and local public sector in the aftermath of the Great Recession. Because of the pursuit of austerity at all levels of government, state and local government employment at the national level only reached its July 2008 level (the prior peak) in November 2019. Just before the pandemic, 21 states and the District of Columbia still had fewer state and local government jobs than in July 2008.
The Senate’s failure to act on federal aid to state and local governments jeopardizes veterans’ jobs
Yesterday, the Republican-controlled Senate and White House rolled out the HEALS Act, which not only guts Pandemic Unemployment Assistance benefits for millions of unemployed workers, but also completely overlooks critical federal aid to state and local governments. This intentional oversight threatens vital public services just when they are needed most and could result in an additional 5.3 million public- and private-sector service workers losing their jobs by the end of 2021. More than one million veterans—13.2% of all veterans—work for state and local governments and could be severely impacted by the Senate’s failure to provide timely federal aid. Because state and local governments are extremely restricted in how they can borrow, congressional authorization for state and local fiscal support is vital to prevent deep cuts in health care and education.
Black workers, who are heavily represented in the overall public-sector workforce, are even more heavily represented in the share of state and local government workers who are veterans. While Black workers make up 12% of the private-sector and 14% of the public-sector workforces, they make up 17% of public-sector workers who are also veterans.
The map in Figure A provides a state-by-state overview of the number of veterans serving in state and local governments around the country. Table 1 provides a list of the top 10 states with the highest numbers of veterans employed by state and local governments. Table 2 provides the list of the top 10 states with the highest shares of veterans employed by state and local governments. California has the largest number of veterans working in state and local governments, while Montana has the largest share.
Congress has failed to extend additional unemployment benefits as millions of workers across the country file new UI claims
The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data last Thursday, showing that another 2.3 million people filed for UI benefits during the week ending July 18. Huge swaths of workers in every state are relying on UI for food, rent, and basic necessities. There are 14 million more unemployed workers than jobs. In the face of this economic crisis, Congress has let the extra $600 in weekly UI benefits expire, and now Senate Republicans are proposing reducing the increase to $200, which would cause such a huge drop in spending that it would cost 3.4 million jobs. These benefit cuts will directly harm the workers and their families who need these benefits to weather the pandemic and will cause further economic harm over the next year.
Figure A shows the share of workers in each state who either made it through at least the first round of state UI processing (these are known as “continued” claims) or filed initial UI claims in the following weeks. The map includes separate totals for regular UI and Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers.
The map also includes an estimated “grand total,” which includes other programs such as Pandemic Emergency Unemployment Compensation (PEUC) and Short-Time Compensation (STC). The vast majority of states are reporting that more than one in 10 workers are claiming UI. Thirteen states and the District of Columbia report that more than one in five of their pre-pandemic labor force is now claiming UI under any of these programs. The components of this total are listed in Table 1.1
One of the most crucial provisions of the last coronavirus relief act was to provide an extra $600 weekly increase in unemployment benefits to the tens of millions of Americans who are currently out of work. Now the White House and many Republican policymakers want to let it expire or reduce it dramatically. But that would be a terrible mistake, and here’s why.
Cutting UI benefits by $400 per week will significantly harm U.S. families, jobs, and growth: 3.4 million fewer jobs will be created over the next year as a result
Last month, we estimated the effect of allowing the $600 supplement to weekly unemployment insurance (UI) benefits to lapse at the end of July, as is currently scheduled. We found that this would strip away enough aggregate demand from the economy to slow growth in gross domestic product (GDP) by 3.7% over the next year. This slower growth would result in 5.1 million fewer jobs created over the next year.
Currently Senate Republicans are offering a proposal to reduce this weekly $600 supplement to closer to $200. This is better than allowing the $600 benefit to go all the way to zero, but this would still lead to GDP that was lower by 2.5% a year from now and would lead to 3.4 million fewer jobs created over the next year.
These are huge numbers—but they are driven by the fact that the support this extra $600 has given tens of millions of working families is huge. The economic shock of COVID-19 was enormous, but the large expansions to the UI system included in the CARES Act of March were incredibly effective in blunting the effect of this shock. The only problem with these expansions was that they begin running out next week—while the job market remains fundamentally damaged.
Joblessness remains at historic levels and there is no evidence UI is disincentivizing work: Congress must extend the extra $600 in UI benefits
Last week 2.3 million workers applied for unemployment insurance (UI) benefits. This is the 18th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Many headlines this morning are saying there were 1.4 million UI claims last week, but that’s not the right number to use. For one, it ignores Pandemic Unemployment Assistance (PUA), the federal program for workers who are not eligible for regular UI, like the self-employed. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way the Department of Labor (DOL) does seasonal adjustments.
Of the 2.3 million workers who applied for UI last week, 1.37 million applied for regular state unemployment insurance (not seasonally adjusted), and 975,000 applied for PUA.
A disaster of Congress’s making is looming for those who have lost their livelihoods during the global pandemic and are now depending on UI to provide for their families. If Congress doesn’t act immediately, the across-the-board $600 increase in weekly unemployment benefits will expire at the end of this week. That would not just be cruel, it would be terrible economics. These benefits are supporting a huge amount of spending by people who would otherwise have to cut back dramatically. That spending is supporting more than 5 million jobs. If Congress kills the $600, they kill those jobs. Figure A shows the number of jobs that will be lost in each state if the $600 is allowed to expire.
Ambitious investments in child and elder care could boost labor supply enough to support 3 million new jobs
- Today, the Biden campaign released a plan calling for $775 billion of investments in child and elder care over the next decade, a large increase over current levels.
- Based on our research, such an investment would support 3 million new jobs and substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers.
- These public investments would provide support that makes child and elder care more affordable for families while also providing a needed boost to the pay and training of the care workforce.
It has been apparent for years that the United States could benefit enormously from a large public investment in care work—including early child care education and elder care. A substantial investment in children would lead to a more productive workforce in the future, spurring large income gains. Investments in seniors would ensure that a decent and dignified retirement is available to all, a commitment that the United States has so far failed to sustain.
Crucially, both sorts of investment would greatly expand the opportunities for working-age adults to seek paid employment. It is well documented by now that the employment rate of prime-age (between 25 and 54 years old) U.S. adults (particularly women) has stagnated relative to our advanced country peers, and it is equally as well documented that the failure to invest in child and elder care is a key reason why.
This morning, the Biden campaign released a plan calling for a broad set of investments in child and elder care. Their plan would invest $775 billion over the next decade, a large increase over current levels. Such an investment would substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers. In 1990, for example, women’s prime-age labor force participation in the United States ranked 7th of 24 among the advanced economies with available data from the Organisation for Economic Co-operation and Development (OECD). By 2000, the United States had slipped to 16th of 35 OECD countries, while in 2019 our ranking was 30th of 35.
Recovering fully from the coronavirus shock will require large increases in federal debt—and there’s nothing wrong with that
The economic shock of the coronavirus has been as sudden and jarring as any in U.S. history. Even if policymakers did nothing to respond to it, the income losses generated by the shock and the automatic expansion of some safety net programs would have led to large increases in the federal budget deficit. But the correct policy response to a shock like the coronavirus is to push deficits even larger than they would go on their own by providing expansions to relief and recovery efforts.
As always, there are some who seem more concerned about the rise in federal budget deficits and public debt than by the rise in joblessness and losses of income generated by the shock. But prioritizing the restraint of debt in coming years over the restoration of pre-crisis unemployment rates is bad economics.
We must prioritize the restoration of pre-crisis unemployment rates over restraint of debt. Anything else is bad economics.
Joblessness and income losses in the wake of the coronavirus shock really are large enough to spark an economic depression that lasts for years. A rising ratio of debt to gross domestic product (GDP), on the other hand, will be mostly meaningless to living standards in the next few years. If baseless fears about the effects of adding to debt block this effective response, then it will cause catastrophic economic losses and human misery. It is often said that economics is about making optimal decisions in the face of scarcity. But we need to be clear what is and what is not scarce in the U.S. economy. The federal government’s fiscal resources—its ability to spend more and finance the spending with either taxes or debt—are not scarce at all. What is scarce is private demand for spending more on goods and services. We need to use policy to address what is scarce—private spending—with what is not.
In this blog post I attempt to answer a few of the many questions I hear about the deficit and debt in light of the current economic crisis. We have created an ongoing web feature here to answer these questions and new questions that come up. A common root to the answers of many questions about the effects of deficits and debt concerns whether the economy’s growth is demand-constrained or whether it is supply-constrained (i.e., at full employment). Because this distinction is so important to so many questions about deficits and debt, we provide this background first.
Joblessness remains at historic levels: The extra $600 in UI benefits expires next week—Congress must extend it
Last week, 2.4 million workers applied for unemployment insurance (UI) benefits. This is the 17th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Of the 2.4 million workers who applied for UI, 1.5 million applied for regular state unemployment insurance (not seasonally adjusted), and 0.9 million applied for Pandemic Unemployment Assistance (PUA).
Many headlines this morning are saying there were 1.3 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program for workers who are not eligible for regular UI, like gig workers. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.
Before I cover more of the details of today’s UI release, I want to take a moment to note that the across-the-board $600 increase in weekly unemployment benefits is set to expire next week.
Many are talking about the potential work disincentive of the extra $600, since the additional payment means many people have higher income on unemployment insurance than they did in their prior job. The concern about the disincentive effect has been massively overblown. First, it ignores the realities of the labor market for working people, who will be unlikely to turn down a permanent job—particularly in a time of extended high unemployment—for a temporary boost in benefits.
Extending the $600 weekly unemployment boost would support millions of workers: See updated state unemployment data
The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data yesterday, showing that another 1.4 million people filed for regular UI benefits last week (not seasonally adjusted) and 1.0 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers. As of last week, more than 35 million people in the workforce are either receiving or have recently applied for unemployment benefits—regular or PUA.
Figure A and Table 1 show the total number of workers who either made it through at least the first round of regular state UI processing as of June 27 (these are known as “continued” claims) or filed initial regular UI claims during the week ending July 4. Three states had more than one million workers either receiving regular UI benefits or waiting for their claim to be approved: California (3.1 million), New York (1.7 million), and Texas (1.4 million). Seven additional states had more than half a million workers receiving or awaiting benefits.
While the largest U.S. states unsurprisingly have the highest numbers of UI claimants, some smaller states have larger shares of the workforce filing for unemployment. Figure A and Table 1 also show the numbers of workers in each state who are receiving or waiting for regular UI benefits as a share of the pre-pandemic labor force in February 2020. In four states and the District of Columbia, more than one in six workers are receiving regular UI benefits or waiting on their claim to be approved: Hawaii (19.7%), Nevada (19.3%), New York (17.8%), District of Columbia (17.6%), and Oregon (17.0%).
The coronavirus pandemic has created a severe budget crisis for state and local governments, as tax revenue has fallen precipitously at the same time that governments are facing extraordinary demands for public health and welfare supports. Because states are severely limited in how they can borrow, the only way to address this crisis is through Congress authorizing significant additional fiscal support to state and local governments. Without federal aid, many states will likely make devastating cuts to the services and staffing they provide, sending the country into a prolonged depression with 5.3 million jobs both public and private likely lost before the end of next year.
Failing to provide aid to state and local governments would be not only be an act of needless economic self-sabotage, it would also exacerbate racial and gender disparities. If state and local governments are forced to cut personnel, those cuts are likely to fall hardest on women and Black workers.
Historically, the public sector has been a key employer for women and people of color. During the Civil Rights era of the 1960s and 1970s, the federal government—through executive actions and legislation—adopted various anti-discrimination and affirmative action measures that boosted the employment of women and Black workers in government. Now, decades later, all state and local government jobs are subject to the federal regulations requiring equal opportunity, and some states and localities have additional affirmative action programs. Consequently, state and local government has generally achieved a more diverse workplace than the private sector.
Almost four months in, joblessness remains at historic levels: Congress must extend the extra $600 in UI benefits, which expires in a little more than two weeks
Last week, 2.4 million workers applied for unemployment insurance (UI) benefits. This is the 16th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Of the 2.4 million workers who applied for UI, 1.4 million applied for regular state unemployment insurance (not seasonally adjusted), and 1.0 million applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance (UI), like gig workers. It took some time, but all states except New Hampshire and West Virginia are now reporting PUA claims.
It’s important to note that some initial claims from last week are likely from people who got laid off prior to last week but either waited until last week to file a claim, or applied earlier and their application had been caught in an agency backlog. Why do I think that’s likely? In May, there were more than 8 million initial claims in regular state UI programs, but last week’s Job Opening and Labor Turnover Survey (JOLTS) data show there were only 1.8 million layoffs, which is back to pre-virus levels. This suggests many May UI claims were from earlier layoffs, and that dynamic is likely still in play.
Figure A shows continuing claims in all programs over time (the latest data are for June 20). Continuing claims are more than 31 million above where they were a year ago. The latest figure in “other programs” in Figure A is 1.2 million claims. Most of this (0.9 million) is Pandemic Emergency Unemployment Compensation (PEUC). PEUC is the additional 13 weeks of benefits provided by the CARES Act for people who have exhausted regular state benefits. The number of people on PEUC can be expected to grow dramatically as the crisis drags on and more and more of the nearly 17 million people currently on regular state benefits exhaust their regular benefits and move on to PEUC.
Hires up, layoffs down but more economic pain is on the horizon: Policymakers must act in order to protect workers’ health and economic well-being
Last week, the Bureau of Labor Statistics (BLS) reported that, as of the middle of June, the economy was still 14.7 million jobs below where it was in February. Today’s BLS Job Openings and Labor Turnover Survey (JOLTS) reports that the labor market was down 13.1 million jobs at the end of May. The labor market began picking up in May, and more so in June, as states began relaxing their stay-at-home orders. Congress’s aid to workers and households also helped to boost demand and spending. Unfortunately, what’s clear from the latest coronavirus data is that the relaxed restrictions on social distancing also had the effect of increased cases and subsequent re-shuttering in certain parts of the country.
Today’s data show that at the end of May, the number of hires increased by 2.4 million to a series high of 6.5 million—the largest monthly increase and largest number of hires on record (series began in 2000). The hires rate also rebounded significantly to 4.9%, the highest rate on record. At the same time, layoffs dropped considerably to 1.8 million, consistent with the average number of layoffs in the pre-coronavirus period. This is a significant fall off from previous months. In April and May, layoffs totaled 19.2 million. Further, 1.8 million layoffs is much lower than the initial unemployment insurance (UI) claims we saw in May. In May, there were more than 8 million initial UI claims in regular state programs. This suggests that a significant share of the initial UI claims in May were from layoffs in March or April—people either waited until May to file claims, or state agencies were working through backlogs of claims.
Unfortunately, there are more recent indicators that layoffs are going to pick up again as people are being laid off for the second time, and hires will likely slow as well.
The latest jobs data for June released this Thursday will likely show some improvements in the labor market. We should remember that these improvements come at a cost: increased spread of COVID-19. In the states that have lifted restrictions ahead of others, there are measurable increases in coronavirus cases. Given the likelihood that states may have to re-shutter parts of their economies with the rise in cases, the job gains we saw last month may not last. So even if we continue to see job gains in this week’s jobs report, the losses this spring were mammoth and, given recent trends on the health front plus the upcoming fiscal cliff, the economic pain will certainly be long lasting.
On Thursday morning, we will also get the latest data on unemployment insurance claims for the week ending June 27. Later that day the Congressional Budget Office will be releasing their economic forecasts, which provide their estimates of future economic growth and the unemployment rate, among other key economic indicators. (At the end of the blog post, I list reminders on what information we get from each labor market data release.) Unfortunately, these releases will show enormous economic hardship that will last for a long time.
As I see it, policymakers have three primary objectives with regard to the labor market: First, make sure those who have to go to work are given adequate compensation and a safe work environment, which means, at a minimum, guaranteeing health and safety protections for workers so that they are able to protect themselves and members of their families from contracting COVID. Second, make it possible for workers who are unable to find a safe job to stay home without becoming financially devastated by delivering sufficient earnings replacement through the unemployment insurance system. Third, ensure the economy can fully recover when we get on the other side of the pandemic.
Nearly 11% of the workforce is out of work with no reasonable chance of getting called back to a prior job
Expanded unemployment insurance continues to be a crucial lifeline for millions of workers: See updated state unemployment data
The U.S. Department of Labor (DOL) released the most recent unemployment insurance (UI) claims data yesterday, showing that another 1.5 million people filed for regular UI benefits last week (not seasonally adjusted) and 0.7 million for Pandemic Unemployment Assistance (PUA), the new program for workers who aren’t eligible for regular UI, such as gig workers. As we look at the aggregate measures of economic harm, it is important to remember that this recession is deepening racial inequalities. Black communities are suffering more from this pandemic—both physically and economically—as a result of, and in addition to, systemic racism and violence. Both Black and Hispanic workers are more likely than white workers to be worried about exposure to coronavirus at work and bringing it home to their families. These communities, and Black women in particular, should be centered in policy solutions.
As of last week, more than one in five people in the workforce are either receiving or have recently applied for unemployment benefits—regular or PUA. These benefits are a critical lifeline that help workers make ends meet while practicing the necessary social distancing to stop the spread of coronavirus. In fact, the $600 increase in weekly UI benefits was likely the most effective measure in the CARES Act for insulating workers from economic harm and jump-starting an eventual economic rebound, and it should be extended past July.
To be clear, our top priority right now should be protecting the health and safety of workers and our broader communities. To accomplish this, we should be paying workers to stay home when possible, whether that means working from home some or all of the time, using paid leave, or claiming UI benefits. When workers are providing absolutely essential services, they must have access to adequate personal protective equipment (PPE) and paid sick leave.
Cutting off the $600 boost to unemployment benefits would be both cruel and bad economics: New personal income data show just how steep the coming fiscal cliff will be
- The Bureau of Economic Analysis (BEA) released data today on personal income showing that the extra $600 in weekly unemployment insurance (UI) benefits—set to expire at the end of July—boosted incomes by $842 billion in May (expressed at an annualized rate).
- We estimate that extending the $600 UI benefits through the middle of 2021 would provide an average quarterly boost to gross domestic product (GDP) of 3.7% and employment of 5.1 million workers.
- The economy’s growth will continue to be tightly constrained by insufficient demand for goods and services, and cutting off a policy support that helps households maintain spending is a terrible idea, both for these households’ welfare and for macroeconomic stabilization.
Congress passed the CARES Act in March to provide relief and recovery from the economic effects of the coronavirus. By far the best part of the CARES Act was a significant expansion of the unemployment insurance (UI) system, which included a $600 per week boost to UI benefits. Congress settled on a flat $600 top-up to weekly benefits because the antiquated state UI administrative capacity could not handle more tailored ways to increase UI benefit generosity, and giving everybody an extra $600 guaranteed that most workers would receive at least as much in UI benefits as they did from their previous employment.
In normal times, economists and policymakers have focused a lot of attention (almost surely too much) on the incentive effects of UI benefits. If these benefits were too generous, the worry was that this would blunt workers’ incentives to actively search for new jobs. The negative economic impacts of these incentive effects have always been exaggerated, but these effects become truly trivial during times when the economy’s growth is clearly constrained by insufficient aggregate demand (spending by households, businesses, and governments).
When growth is demand-constrained, there are more potential workers than available jobs, so hounding these potential workers into more intense job-searching by making UI benefits less generous doesn’t result in more jobs being created, it just results in more frustrated job searches. This logic became even more compelling during the first phase of the economic collapse caused by the coronavirus. Not only were there not enough jobs to employ willing workers, for public health reasons we didn’t want enough jobs to employ these workers, as the shutdown in economic activity and employment was the point of lockdown measures. Even as official lockdowns ease in coming months (often prematurely), jobs will be sharply constrained by demand, not workers’ incentives.
More than three months in, job losses remain at historic levels: Over one in five workers are either on unemployment benefits or are waiting to get on
Last week, 2.2 million workers applied for unemployment benefits. This is the 14th week in a row that initial unemployment claims are more than twice the worst week of the Great Recession.
Of the 2.2 million who applied for unemployment benefits last week, 1.5 million applied for regular state unemployment insurance (UI) on a not-seasonally-adjusted basis, and 0.7 million applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g., the self-employed). At this point, 46 states, D.C., and Puerto Rico are reporting PUA claims.
Overall, things are not really improving. Figure A shows continuing claims in all programs—these data allow us to see how recipiency levels have changed over time (the latest date continuing claims are available for all programs is June 6). After the peak on May 9, claims declined somewhat, but increased in the latest data—nearly back to the peak—and are more than 29 million above where they were a year ago (which was 1.5 million).
Continuing unemployment claims in all programs: January 4, 2020–June 6, 2020
|Regular state UI||PUA||Other programs (mostly PEUC and STC)|
Notes: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are out of work because of the virus but who are not eligible for regular state unemployment insurance benefits (e.g., the self-employed). “Other programs” includes Pandemic Emergency Unemployment Compensation (PEUC), Short-Time Compensation (STC), and others; a full list can be found in the bottom panel of the table on page 4 at this link: https://www.dol.gov/ui/data.pdf.
The latest figure in “other programs” in Figure A is 1.2 million claims. Most of this (0.9 million) is Pandemic Emergency Unemployment Compensation (PEUC). PEUC is the additional 13 weeks of benefits provided by the CARES Act for people who have exhausted regular state benefits. PEUC declined somewhat in the latest data, but we can expect the number of people on PEUC to grow dramatically as the crisis drags on and more and more of the nearly 18 million people currently on regular state benefits exhaust their regular benefits and move on to PEUC.
With minimum wages set to rise next week in Nevada, Oregon, Illinois, and the District of Columbia—as well as in Chicago, Minneapolis, Los Angeles, San Francisco, and 12 other smaller cities and counties—it’s not surprising that business groups that always oppose higher minimum wages are calling for states and cities to put scheduled increases on hold in light of the coronavirus pandemic. There is no question that the pandemic has created unprecedented challenges for state and local economies, but the case for raising wages for low-wage workers hasn’t changed. If anything, current conditions make it even more important for governments to strengthen pay standards, especially those that help low-income households.
The number one problem for businesses right now isn’t excessive labor costs, it’s a lack of demand. The federal government’s failure to quickly implement large-scale testing, contact tracing, and containment programs in the early days of the coronavirus’s spread forced most state and local governments to effectively put their economies into hibernation—limiting business activity to slow the spread of the virus. As cities and states reopen their economies, the central challenge for businesses and economic policymakers will be restoring consumer demand and making regular economic activity safe in the face of continued legitimate concern over the virus.
From a general macroeconomic perspective, raising the minimum wage in a period of depressed consumer demand is smart policy. Minimum wage hikes put extra dollars in the pockets of people who are highly likely to spend every additional cent they receive, often just to make ends meet. Workers who benefit from an increased minimum wage disproportionately come from low-income households that spend a larger share of their income than business owners, corporate shareholders, and higher-income households, who are likely to save at least some portion of the dollars that finance a minimum wage hike. As a result, raising the minimum wage boosts overall consumer demand, with research showing that past raises have spurred greater household buying, notably on dining out and automobiles. (Such findings are a good reminder that relatively small increases in a worker’s paycheck might be all that is needed for them to qualify for an auto loan or a mortgage.)
Because a higher minimum wage lifts up lower-income households—although some middle-income households benefit, too—it is likely to have a stronger effect than many—possibly even most—other recession response measures state and local policymakers might consider. Tax breaks or deferrals, rent subsidies, expanded lending programs, and other business-oriented relief measures all can help firms weather a downturn, but they’re not going to drive additional spending in the same way that a minimum wage hike does.
Trump’s ban on temporary work visas is an attempt to scapegoat immigrants during an economic collapse: Real reform would improve wages and working conditions
President Trump has issued a new proclamation, “Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak,” that will halt the issuance of certain major categories of nonimmigrant (i.e., temporary) work visas until the end of 2020, and calls for a number of rule changes with respect to work visas and work authorization. (A presidential proclamation is essentially the same as an executive order.) This follows his April proclamation that would suspend a third of immigrant visas from being issued (immigrant visas are also known as “green cards,” which confer foreign residents with lawful permanent resident status that can eventually lead to citizenship). The language in the April proclamation, which was initially valid for 60 days, also directed federal agencies to examine nonimmigrant work visas; this new proclamation appears to be the result of that effort. Trump’s new proclamation extends the duration of the April proclamation banning certain green cards until the end of 2020.
Trump’s June 2020 proclamation will suspend the issuance of new temporary work visas to migrants and their family members if they are applying from abroad, between now and December 31, 2020, but does not appear to suspend the issuance of visa statuses for those applying from within the United States. The impacted visa classifications are the H-1B for occupations requiring a college degree, H-2B for low-wage jobs outside of agriculture, L-1 for intracompany transferees and personnel with specialized knowledge, and some of the major programs that authorize employment in the J-1 Exchange Visitor Program, specifically the J-1 Intern, Trainee, Teacher, Camp Counselor, Au Pair, and Summer Work Travel programs.
While most of these visa classifications are issued to applicants at consulates abroad and are therefore suspended, the H-1B is an exception. In 2019, 60% of new H-1Bs were issued to migrants who were already present in the United States, often on a student visa. Therefore, the H-1B program will be less impacted in terms of a reduction in visas. (It may even result in a higher share of foreign graduates of U.S. universities being granted H-1B status, since they’ll be applying from within the country.)
Workers are striking during the coronavirus: Labor law must be reformed to strengthen this fundamental right
The coronavirus pandemic has revealed much about work in the United States: There have been countless examples of workers speaking out against unsafe work conditions and demanding personal protective equipment (PPE) to try and stay healthy and safe on the job. We also have seen that essential workers are often not paid commensurate with the critical nature of their work. Few U.S. workers have access to paid sick time or paid leave of any kind. And, when workers have advocated for health and safety protections or wage increase, they have often been retaliated against, and even fired for doing so. As a result, many workers have decided to strike in an effort to have their voices heard.
Even before the pandemic, data from the Bureau of Labor Statistics (BLS) showed an upsurge in major strike activity in 2018 and 2019, marking a 35-year high for the number of workers involved in a major work stoppage over a two-year period. Further, 2019 recorded the greatest number of work stoppages involving 20,000 or more workers since at least 1993, when the BLS started providing data that made it possible to track work stoppages by size. In fact, after decades of decline, strike activity surged in 2018, with 485,200 workers involved in major work stoppages—a nearly twenty-fold increase from 25,300 workers in 2017. The surge in strike activity continued in 2019, with 425,500 workers involved in major work stoppages. On average in 2018 and in 2019, 455,400 workers were involved in major work stoppages—the largest two-year average in 35 years.
DACA survives at SCOTUS: For now, ‘Dreamers’ will continue to be protected from deportation, but a permanent solution is urgently needed
Almost eight years to the day after President Obama announced his Deferred Action for Childhood Arrivals initiative, better known as DACA, the Supreme Court of the United States (SCOTUS) has issued a decision in Department of Homeland Security et al. v. Regents of the University of California et al.—the litigation concerning whether the Trump administration’s attempt to end DACA was carried out lawfully. In a stunning rebuke to the Trump administration’s ham-handed rescission of DACA, the highest court in the land—which has a majority of staunchly conservative justices—ruled 5–4 that the Trump administration failed to comply with the requirements of the Administrative Procedure Act (APA) when ending DACA. In doing so, SCOTUS upheld the findings of three lower courts that also determined the APA had not been complied with and that had allowed DACA to remain in effect via a nationwide injunction while the legal challenges continued. As a result, DACA will continue to exist, for now.
The immediate practical impact of the SCOTUS ruling on DACA cannot be overstated: It means 650,000 undocumented U.S. residents who were brought to the United States as children won’t lose their current protection from deportation. They can continue to attend school and work lawfully, and they can keep contributing to their communities and local economies.
The DACA initiative didn’t provide a permanent legal status, only a temporary reprieve from deportation that can be renewed every two years, along with the ability to obtain a Social Security Number and an employment authorization document. Nevertheless, this stopgap measure that DACA represents, which keeps immigrants from being deported to a country they can barely remember, has resulted in significant economic and educational achievements for DACA recipients. Being able to work lawfully and without the specter of deportation looming over them means DACA recipients are able to have basic labor rights, which in turn have translated into wage gains. How big are the wage gains? According to a study and survey conducted by Professor Tom Wong and United We Dream, the National Immigration Law Center, and the Center for American Progress, the hourly wages earned by DACA recipients increased 86% since they received DACA, from $10.46 per hour to $19.45 per hour. The wage gains were even higher for DACA recipients who are 25 and older—128%—from $10.64 per hour to $23.70. Wage gains of this magnitude can literally be the difference between being in poverty and entering the middle class.
A quarter of a year in, job losses remain at historic levels: More than one in five workers are either on unemployment benefits or are waiting to get on
Last week, 2.2 million workers applied for unemployment benefits. This is the 13th week in a row—a full three months—that initial unemployment claims are more than twice the worst week of the Great Recession.
Of the 2.2 million who applied for unemployment benefits last week, 1.4 million applied for regular state unemployment insurance (UI) on a not-seasonally-adjusted basis, and 0.8 million applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g., the self-employed). At this point, only 44 states, D.C., and Puerto Rico are reporting PUA claims.
How is it that we are still seeing large numbers of initial unemployment claims now, when the May jobs report shows we added jobs? The missing piece is hiring. If there are a large number of layoffs, there can still be job growth if there is also a lot of hiring (or rehiring). In today’s gradually reopening coronavirus economy, hires (or rehires) are now outpacing job losses, but we are still seeing a huge number of people losing jobs. This means labor market “churn” is vastly greater than in normal times.
Further, some recent unemployment claims may be from people who lost their job in March or April but didn’t apply right away (perhaps because they couldn’t get through the system).
Many commentators are still reporting the cumulative number of initial regular state UI claims over the last 13 weeks as a measure of how many people are out of work because of the virus. I believe we should abandon that approach because it ignores PUA but overstates things in other ways (for example, some who were laid off and applied for UI in March or April may now be going back to work). Instead, we can calculate the total number of workers who are either on unemployment benefits, or have applied and are waiting to see if they will get benefits, in the following way: