Another 1.1 million people applied for unemployment insurance (UI) benefits last week. That includes 787,000 people who applied for regular state UI and 345,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year. The 1.1 million who applied for UI last week was a decline of 47,000 from the prior week’s revised figures (revisions from prior weeks were substantial due to California having completed its pause in the processing of initial claims and updating its numbers).
Last week was the 31st straight week total initial claims were far greater than the worst week of the Great Recession. (If that comparison is restricted to regular state claims—because we didn’t have PUA in the Great Recession—initial claims last week were still well over three times their pre-recession levels.)
Most states provide 26 weeks (six months) of regular benefits, and October marks the eighth month of this crisis. That means many workers are exhausting their regular state UI benefits. In the most recent data, continuing claims for regular state UI dropped by more than a million, from 9.40 million to 8.37 million.
- Long before the COVID-19 pandemic the Trump administration was squandering the pockets of strength in the American economy it had inherited.
- Broad-based prosperity requires strength on the supply, demand, and distributive sides of the economy, and Trump administration policies were either weak or outright damaging on these fronts.
- Demand: Most of the Trump tax cuts went to already-rich corporations and households, who tend to save rather than spend most of any extra dollar they’re given.
- Supply: Business investment plummeted under the Trump administration, despite their lavishing tax cuts on corporate business.
- Distribution: The Trump administration undercut labor standards and rules that can buttress workers’ bargaining power.
You don’t have to be an economist to know how the U.S. economy is doing today: It’s an utter shambles, with tens of millions of workers unable to find the work they need to get by, and with tens of millions of families facing extreme hardship and anxiety. These terrible conditions are mostly the result of the failure to manage and contain the COVID-19 outbreak, and the failure to appropriately respond in the economic policymaking realm.
President Trump, however, clearly wants voters to see the COVID-19 outbreak and fallout as nobody’s fault, and further wants to be graded on how the economy was doing pre-COVID-19. This is obviously absurd; the administration didn’t cause COVID-19, but it is responsible for the botched response to it.
Even besides this, however, it is far from clear that the pre-COVID-19 U.S. economy was evidence of good management or policy, a fact that voters seem increasingly aware of. In fact, Trump administration policies were squandering the pockets of strength in the U.S. economy that they inherited from their predecessors by using them to disguise the rapid erosion their policies were causing to U.S. families’ economic security.
Some estimates have put the shortage of teachers relative to the number of new vacancies in classrooms across the country that go unfilled at more than 100,000—a crisis exacerbated by the pandemic. But policy changes can go a long way in addressing this shortfall.
We lay out those policy solutions in our just-released paper, A Policy Agenda to Address the Teacher Shortage in U.S. Public Schools: The Sixth and Final Report in the ‘Perfect Storm in the Teacher Labor Market’ Series. It is part of an EPI two-year long project documenting the teacher shortage faced by U.S. public schools over the last few years and explaining the multiple factors that have contributed to it.
The culmination of this research coincided with the devastating impact of the COVID-19 pandemic on the nation’s education system, which threatens to make the teacher shortage crisis even worse.
The added challenges mainly arise from three sources.
How much would it cost consumers to give farmworkers a significant raise?: A 40% increase in pay would cost just $25 per household
The increased media coverage of the plight of the more than 2 million farmworkers who pick and help produce our food—and whom the Trump administration has deemed to be “essential” workers for the U.S. economy and infrastructure during the coronavirus pandemic—has highlighted the difficult and often dangerous conditions farmworkers face on the job, as well as their central importance to U.S. food supply chains. For example, photographs and videos of farmworkers picking crops under the smoke- and fire-filled skies of California have been widely shared across the internet, and some data suggest that the number of farmworkers who have tested positive for COVID-19 is rivaled only by meat-processing workers. In addition, around half of farmworkers are unauthorized immigrants and 10% are temporary migrant workers with “nonimmigrant” H-2A visas; those farmworkers have limited labor rights in practice and are vulnerable to wage theft and other abuses due to their immigration status.
Despite the key role they play and the challenges they face, farmworkers are some of the lowest-paid workers in the entire U.S. labor market. The United States Department of Agriculture (USDA) recently announced that it would not collect the data on farmworker earnings that are used to determine minimum wages for H-2A workers, which could further reduce farmworker earnings.
This raises the question: How much would it cost to give farmworkers a significant raise in pay, even if it was paid for entirely by consumers? The answer is, not that much. About the price of a couple of 12-packs of beer, a large pizza, or a nice bottle of wine.
The latest data on consumer expenditures from the Bureau of Labor Statistics (BLS) provides useful information about consumer spending on fresh fruits and vegetables, which, in conjunction with other data, allow us to calculate roughly how much it would cost to raise wages for farmworkers. (For a detailed analysis of these data, see this blog post at Rural Migration News.) But to calculate this, first we have to see how much a typical household spends on fruits and vegetables every year and the share that goes to farm owners and their farmworker employees.
Updated state-level unemployment claims data: Workers across the country need Congress to increase unemployment benefits
The most recent unemployment insurance (UI) claims data released today show that another 1.3 million people filed for UI benefits last week. However, trends over time should be interpreted with particular caution right now because California data are being imputed since they have temporarily paused their processing of initial claims.
For the past 11 weeks, workers have gone without the extra $600 in weekly UI benefits—which Senate Republicans allowed to expire—and are instead typically receiving around 40% of their pre-virus earnings. This is far too meager, in any state, to sustain workers and their families through lengthy periods of joblessness.
The president’s early August executive memo, intended to give recipients an additional $300 or $400 in UI, instead resulted in reduced benefits and extreme delays—and left many workers ineligible. In some states, even this inadequate additional benefit is still unavailable to workers. For example, New Jersey workers won’t be able to collect additional benefits until October 19. The mixed messages coming from the White House continued last week when President Trump announced, via Twitter, the end of stimulus negotiations with Democratic leaders. When the stock market declined sharply in response, the president backtracked.
These half-measures and empty promises simply will not do when we are facing a massive jobs deficit and an initial recovery that has already slowed substantially. The UI benefits cuts were the first big gash of austerity that will slow the economy’s recovery. The second will be the cutbacks to state and local government spending and employment that will occur without already long-overdue federal fiscal aid. To ensure a strong recovery, Congress must pass a substantial stimulus bill that goes well beyond the meager bill announced by Senate Majority Leader Mitch McConnell on Tuesday. The stimulus must include a sizeable increase to UI benefits and aid to state and local government.
Another 1.3 million people applied for unemployment insurance (UI) benefits last week. That includes 898,000 people who applied for regular state UI and 373,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year. The 1.3 million who applied for UI last week was roughly unchanged (a decline of 38,000) from the prior week’s figures. Last week was the 30th straight week total initial claims were far greater than the worst week of the Great Recession, and if that comparison is restricted to regular state claims—since we didn’t have PUA in the Great Recession—initial claims last week were greater than the second-worst week of the Great Recession. However, trends over time in initial claims should be interpreted with caution right now because California initial claims data are being imputed because they have temporarily paused processing initial claims to address problems in their system.
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire at the end of July, so last week was the 11th week of unemployment in this pandemic for which recipients did not get the extra $600. Hope for another stimulus bill before February is waning. The House passed a $2.2 trillion relief package earlier this month, but Senate Republicans balked at the $1.8 trillion relief package Treasury Secretary Mnuchin offered to Nancy Pelosi. Senate Majority Leader Mitch McConnell announced on Tuesday that the Senate will take up a very small relief bill next week, but it seems clear that getting something done with less than 20 days until the election will be exceedingly difficult. It is looking more and more like stimulus talks will fail, which means the extra $600 is not coming back anytime soon, and the economy will also not be getting other crucial stimulus measures it needs to bounce back, including aid to state and local governments.
Most states provide 26 weeks (six months) of regular benefits, and October is the eighth month of this crisis. That means many workers are exhausting their regular state UI benefits. In the most recent data, continuing claims for regular state UI dropped by 1.2 million, from 11.2 million to 10.0 million.
1.3 million people filed initial unemployment insurance claims last week: It is terrible economics to pause stimulus talks
Another 1.3 million people applied for unemployment insurance (UI) benefits last week. That includes 840,000 people who applied for regular state UI and 464,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year.
The 1.3 million who applied for UI last week was a decline of 53,000 from the prior week’s revised figures, although trends over time should be interpreted with caution right now because California data are being imputed because the state has temporarily paused its processing of initial claims. It is worth noting that today’s data on initial claims do not include any workers who may have been laid off or furloughed in the wake of President Trump tweeting earlier this week that he was halting stimulus talks (more on that below).
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire at the end of July, so last week was the tenth week of unemployment in this pandemic for which recipients did not get the extra $600. On Tuesday, President Trump announced he had ordered his negotiators to stop talks with Democratic leaders on another stimulus package. If that abrupt move holds, it means the extra $600 is not coming back anytime soon, and the economy will also not be getting other crucial stimulus measures it needs, including aid to state and local governments.
This is terrible economics. For example, the extra $600 in weekly UI benefits was supporting a huge amount of spending by people who, without it, have to make drastic cuts. The spending made possible by the $600 was supporting millions of jobs. Cutting that $600 means cutting those jobs—it means the workers who were providing the goods and services that UI recipients were spending that $600 on lose their jobs. The map in Figure B of this blog post shows how many jobs will be lost by state because of the expiration of the $600.
What teaching is like during the pandemic—and a reminder that listening to teachers is critical to solving the challenges the coronavirus has brought to public education
As we mark this year’s World Teachers’ Day and reflect on this year’s theme, “Teachers: Leading in crisis, reimagining the future,” we are especially reminded of the challenges that the COVID-19 pandemic has added to teachers and to their jobs, as well as of the need to consider teachers’ expertise and judgment in the future of education. In this blog post, we offer a first-person account of what teaching and being a teacher during the pandemic are like, using Ms. Ivey Welshans’s remarks at a recent webinar, reproduced below. Welshans’s and her colleagues’ viewpoints, which are frequently unheard in policy, research, and the media, should be deemed more irreplaceable than ever on this occasion: Teachers are the closest witnesses of the challenges the pandemic has brought for their students, for themselves, and for their jobs, and their expertise and judgment are critically important to solving these challenges as the pandemic continues and in its aftermath.
Recently, we joined a webinar with EPI president Thea Lee, American Federation of Teachers president Randi Weingarten, and special education teacher (and co-author of this blog post) Ivey Welshans, where we discussed the goals and key findings of our latest report, COVID-19 and Student Performance, Equity, and U.S. Education Policy: Lessons from Pre-Pandemic Research to Inform Relief, Recovery, and Rebuilding.
During the presentation, we explained our goals as authors to describe what has been happening to students with respect to learning and development since the pandemic closed virtually all schools. We emphasized that we wanted to move from a focus on student outcomes—which tend to reflect underlying, systemic trends—to understanding the inputs that shape learning and development and developing relevant policy actions. We also presented some of the lessons learned from relevant research and explained how they inform our recommendations for policymakers regarding how best to address the adverse impacts of COVID-19 on education and rebuild a stronger, more equitable public education system.
The Job Openings and Labor Turnover Survey shows hiring failed to improve: Congress must act to fix massive jobs shortfall
Last week, the Bureau of Labor Statistics (BLS) reported that, as of the middle of September, the economy was still 10.7 million jobs below where it was in February. Job growth slowed considerably over the last few months and the jobs deficit in September was easily over 12 million from where we would have been if the economy had continued adding jobs at the pre-pandemic pace. Today’s BLS Job Openings and Labor Turnover Survey (JOLTS) reports job openings softened from 6.7 million in July to 6.5 million in August, while layoffs and quits both dropped. While the slowdown in layoffs is promising, the drop in quits is a concern. Hiring in August was on par with what we experienced in July. The U.S. economy is seeing a significantly slower pace of hiring than we experienced in May or June—hiring is roughly where it was before the recession, which is a big problem given that we have more than 12 million jobs to make up. No matter how it is measured, the U.S. economy is facing a huge jobs shortfall.
One of the most striking indicators from today’s report is the job seekers ratio, that is, the ratio of unemployed workers (averaged for mid-August and mid-September) to job openings (at the end of August). On average, there were 13.1 million unemployed workers while there were only 6.5 million job openings. This translates into a job seekers ratio of two unemployed workers to every job opening. Another way to think about this: For every 20 workers who were officially counted as unemployed, there were available jobs for only 10 of them. That means, no matter what they did, there were no jobs for 6.6 million unemployed workers. And this misses the fact that many more weren’t counted among the unemployed. Without congressional action to stimulate the economy, we are facing a slow, painful recovery.
The first big gash of austerity: The cutback to the $600 boost to unemployment benefits reduced personal income by $667 billion (annualized) in August
- Data released today by the Bureau of Economic Analysis showed that the expiration of enhanced unemployment insurance (UI) benefits pulled $667 billion in purchasing power out of the economy in August alone (expressed as an annualized amount).
- So far, this first dose of austerity has not led to outright recession, largely because it has been overwhelmed by the reopening effect, with businesses reopening in the wake of coronavirus-induced shutdowns.
- Over time, the austerity-driven drag on income growth is likely to overwhelm the reopening effect and lead to the U.S. reentering recession, absent a very large reversal in policy.
After the U.S. lost 22.2 million jobs in March and April this year, 9.2 million jobs were created in May, June, and July. In August, the pace of monthly job growth fell to its slowest pace, with 1.4 million jobs created. In some sense, any job growth at all in August was a relief. In the beginning of the month, the first gash of austerity hit the economic recovery, with the enhanced $600 weekly unemployment insurance (UI) benefits cutting off. Data released today by the Bureau of Economic Analysis (BEA) show that this cut-off of enhanced UI benefits (the Pandemic Unemployment Compensation, or PUC) pulled $667 billion of purchasing power out of the U.S. economy in the month of August alone (expressed as an annualized amount). It would have been more, but some of the enhanced $600 payments spilled over into August data.
One way to scale this impact is to express it as the equivalent of an across-the-board pay cut for all U.S. workers—in these terms it can be thought of as an economywide 7.1% pay cut. In September’s data, when the full $600 is completely gone from personal income data, this will rise to closer to 10%.
With millions of workers receiving unemployment benefits and no end in sight for the COVID-19 pandemic, Congress must act
Another 1.5 million people applied for unemployment insurance (UI) benefits last week. That includes 837,000 people who applied for regular state UI and 650,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year. The 1.5 million who applied for UI last week was unchanged from the prior week.
Note: California has shut down all new UI claims while they prepare an updated identity verification system to combat fraud, but the Department of Labor (DOL) adjusted for that in their published numbers. UI fraud is not about individuals filing a one or two fraudulent claims, but sophisticated schemes involving extensive identity theft and the overriding of security systems. That UI systems are vulnerable to these attacks is no great surprise, given that UI agencies are often working on computer systems that are decades old. One take-home message here is that we need to invest heavily in the technology of our UI systems.
Most states provide 26 weeks (six months) of regular benefits—and the coronavirus crisis has now lasted more than six months. That means many workers are exhausting their regular state UI benefits. In the most recent data, continuing claims for regular state UI dropped by almost a million, from 12.75 million to 11.77 million.
On Friday, the Bureau of Labor Statistics (BLS) will release its latest jobs report with a snapshot of the labor market in mid-September. By now, the pandemic recession has caused immense damage to the health and economic well-being of millions of people for over six months. The economic pain easily extends to over 33 million people in the economy today, and that doesn’t include those who had lost their jobs and regained employment but got behind on their bills or those who lost loved ones and providers to illness.
Now that the economic losses have lingered on for this long, it may be time to reevaluate the metrics we use to determine the extent of the jobs deficit in the labor market today. The employment losses in March and April totaled 22.2 million, while the economy gained 10.6 million jobs between May and August. By that measure, the labor market was still down around 11.5 million jobs in August.
However, the more appropriate counterfactual would be to compare jobs today to how many would have been created if the labor market hadn’t tanked in the spring. So, what’s the appropriate counterfactual: average monthly job growth in the three months prior to the recession (216,000), six months prior (217,000), or twelve months prior (194,000)? All are defensible, but let’s go with the lowest value. At 194,000 jobs per month, the labor market would’ve added another 1,164,000 jobs over the last six months. That would give us a jobs deficit of 12.7 million (the 11.5 million fewer jobs we have than we had in February, plus the 1.2 million jobs we would have added over that period if the recession hadn’t occurred).
Among the many important legacies Justice Ruth Bader Ginsburg leaves behind is a critical labor law legacy that shines a light on the inequality of bargaining power between employees and employers.
One particular Ginsburg dissent is now driving a movement to shatter the notion that employees and employers have equal bargaining power.
In 2018, Ginsburg highlighted the inherent power imbalance in employment contracts as the key fault line between liberal and conservative legal opinion on employment regulation in her dissent in Epic Systems v. Lewis. By a 5–4 majority, the Supreme Court held that an employer may lawfully require its employees to agree, as a condition of employment, to take all employment-related disputes to private arbitration on an individual basis, and to waive their right to participate in a class action or class arbitration, i.e., collective action.
‘We prioritized open bars before giving resources to schools’: How the U.S. coronavirus response has failed students and teachers
For all the rhetoric about the importance of in-person learning for K–12 students, policymakers have failed to mitigate the coronavirus pandemic’s impact on education and provide the necessary funding to state and local governments to make it safe to do so.
That was the resounding message among key educators, researchers, and labor leaders the Economic Policy Institute convened to discuss what needs to be done to limit damage to student performance amid the coronavirus pandemic.
“We prioritized open bars before giving resources to schools,” said Elaine Weiss, an EPI research associate who was a panelist at the webinar and is co-author of a new report, COVID-19 and Student Performance, Equity, and U.S. Education Policy.
The report outlines a three-pronged plan for schools and the U.S. education system: immediate relief, short-term recovery, and long-term rebuilding.
The panel also included:
- Randi Weingarten, president of the 1.7 million-member American Federation of Teachers, AFL-CIO
- Emma García, economist at EPI
- Ivey Welshans, teacher at Middle Years Alternative School in Philadelphia
EPI president Thea Lee was the moderator and asked each panelist: “What would you tell Congress are the consequences of not acting right now to give the resources that are needed for state and local governments? What does that mean for students, for inequality, and for our future?”
Here’s what they said.
The most frequent question I’ve gotten in the last few months is, “How many workers are being hurt by the coronavirus recession?” There is a huge amount of confusion about this because two major, completely separate, government data sets that address this question are reporting very different numbers. Specifically, the Bureau of Labor Statistics (BLS) reported that the official number of unemployed workers in August, from the Current Population Survey, was 13.6 million. But during the reference week for that monthly unemployment figure—the week ending August 15—the Department of Labor (DOL) reported that there were a total of 29.2 million people claiming unemployment insurance (UI) benefits. The UI number is compiled by DOL from reports it receives from state unemployment insurance agencies.
What is going on? In a nutshell: The BLS official number of unemployed workers vastly understates the number of workers who have faced the negative consequences of the coronavirus recession, and DOL’s UI number overstates the number of workers receiving unemployment benefits.
Many workers have exhausted their state’s regular unemployment benefits: The CARES Act provided important UI benefits and Congress must act to extend them
Another 1.5 million people applied for unemployment insurance (UI) benefits last week. That includes 870,000 people who applied for regular state UI and 630,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year.
Last week was the 27th week in a row—more than six months—that total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn’t have PUA in the Great Recession), claims are still greater than the third-worst week of the Great Recession.
We’ve hit a grim milestone. Most states provide 26 weeks of regular benefits. That means last week was the first week many workers had exhausted their regular state UI. However, data on continuing claims for regular state UI is delayed a week, so we can’t see the drop yet. The good news is that unless there are administrative glitches, total claims should not fall as a result of individuals exhausting regular state UI, because unemployed workers can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of benefits (and is only available to people who were on regular state UI). Note: PEUC was part of the CARES Act. It is different from Pandemic Unemployment Compensation, or PUC, the now-expired $600 additional weekly benefit, which anyone on any UI program had been eligible for. With people moving from regular state benefits onto PEUC, I expect PEUC began to spike up dramatically last week. However, because of reporting delays for PEUC, we won’t get PEUC data from last week until October 8.
From President Trump’s first day on the job, his administration has systematically promoted the interests of corporate executives and shareholders over those of working people. The current administration has rolled back worker protections, proposed budgets that slash funding for agencies that safeguard workers’ rights, wages, and safety, and consistently attacked workers’ ability to organize and collectively bargain. The pandemic has provided the administration an opportunity to continue its attack on workers’ rights. We recently published a report that looks at the 50 most egregious actions the Trump administration has taken against workers, but here we take a look at five of the worst actions on that list.
The Trump administration failed to adequately address the coronavirus pandemic
Despite the widespread reach of COVID-19 in the workplace, the Occupational Safety and Health Administration (OSHA) has refused to issue an Emergency Temporary Standard to protect workers during the pandemic. OSHA is also failing to enforce the Occupational Safety and Health Act during the pandemic. Despite nearly 10,000 complaints from workers about unsafe working conditions from COVID-19, the agency has only issued a handful of citations for failure to protect workers. In addition, the Centers for Disease Control issued dangerous guidelines that allowed essential workers to continue to work even if they may have been exposed to the coronavirus—as long as they appear to be asymptomatic and the employer implements additional limited precautions. The lack of these basic protections has led to thousands of essential workers becoming infected with the coronavirus, and many have died as a result.
While Congress passed the Families First Coronavirus Relief Act (FFCRA) and the CARES Act to provide workers with temporary paid sick leave and unemployment insurance (UI) expansion, the Trump administration issued temporary guidance that weakened worker protections under these relief and recovery measures. For example, the Department of Labor (DOL) excluded millions of workers from paid leave provisions under the FFCRA, including 9 million health care workers and 4.4 million first responders, before revising the rule after a federal judge invalidated parts of the original rule in August. Further, the Trump administration has vehemently opposed the extension of the $600 increase of unemployment insurance benefits and additional aid to state and local governments. The lack of fiscal relief will cost millions of jobs, including 5.3 million jobs due to insufficient federal aid to state and local governments and 5.1 million jobs due to the expiration of the $600 boost in UI.
Over 13 million more people would be in poverty without unemployment insurance and stimulus payments: Senate Republicans are blocking legislation proven to reduce poverty
It is often underappreciated how effective public safety net spending and social insurance programs are in reducing poverty. Even in normal years, tens of millions of people are kept out of poverty only because of these programs. As the COVID-19 pandemic hit earlier this year, the importance of public spending in averting poverty became even more evident.
In its annual report on household income and poverty released Tuesday, the Census Bureau estimated that Social Security kept 26.5 million people out of poverty in 2019, and refundable tax credits like the Earned Income Tax Credit and Child Tax Credit reduced the number of people in poverty by 7.5 million. Unemployment insurance (UI) kept about 472,000 people from being in poverty (see Figure A) in 2019. The relatively small poverty reduction is due to the fact that few people received UI in 2019, both because of relatively low unemployment rates and because many low-wage workers are generally ineligible for UI benefits due to restrictive earnings eligibility requirements.
Unemployment insurance and Economic Impact Payments reduced poverty in June 2020: Number of people in poverty and reductions due to specific government programs, in 2019 and in June 2020 (thousands)
|Category||Number of people|
|Total number of people in poverty in 2019||33,984|
|Total number of people in poverty in June 2020||29,264|
|Economic Impact Payments||8,181|
|EIP and UI||13,216|
Notes: All the estimates are based on official poverty rate estimates, except the 2019 estimate of the UI poverty reduction uses the Supplemental Poverty Measure.
Source: The June 2020 estimates use percent changes in poverty from January to June 2020 estimated in Table 3, Panel A, of Han, Meyer, and Sullivan, “Income and Poverty in the COVID-19 Pandemic” (2020), http://www.nber.org/papers/w27729, and apply those estimates to the official 2019 poverty level from the 2020 Current Population Survey Annual Social and Economic Supplement.
Another 1.5 million people applied for unemployment insurance (UI) benefits last week. That includes 860,000 people who applied for regular state UI and 659,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year.
Last week was the 26th week in a row total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn’t have PUA in the Great Recession), claims are still greater than the third-worst week of the Great Recession.
Most states provide 26 weeks of regular state benefits. After an individual exhausts those benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of benefits that is available only to people who were on regular state UI. (A reminder: PEUC is different from Pandemic Unemployment Compensation, or PUC, the now-expired $600 additional weekly benefit, which anyone on any UI program had been eligible for.)
Yesterday’s Census Bureau report on 2019 income levels showed significant gains in median household income in 2019, but it doesn’t necessarily tell the whole story. First, those gains may not be as strong as initially reported given survey nonresponse bias, which we explain below. Second, household incomes in 2019 provide little information on what is currently happening in the U.S. economy because of the COVID-19 pandemic. Third, as a measure of how strong the economy can get, there is still room for improvement in terms of overall growth as well as in narrowing economic inequality and closing racial gaps.
According to the Census Bureau’s latest report, median household incomes rose 6.8% between 2018 and 2019. Ignoring the nonresponse concerns and taking this at face value, this represents a significant step towards reclaiming the lost decade of income growth caused by the Great Recession. The economy continued to grow in 2019 and the unemployment rate averaged 3.7% over the year. Increasing earnings as well as slowing inflation between 2018 and 2019 contributed to significant gains in household incomes.
And yet there’s reason to put a big old asterisk on the data for 2019. Although the data release includes information about 2019 only, the data was collected between February and April of this year, right as the pandemic began to spread rapidly and most of the country was locked down. This Census paper discusses some of the impacts the pandemic had on data collection efforts. Overall, nonresponse increased significantly and was more strongly associated with income than in previous years, with nonresponse decreasing as income increases, meaning that income data could be skewed higher than it actually was. Respondents were also less likely to be Black and more likely to be white or Hispanic. Using that information, researchers at the Census provided new estimates for household income over the last four years, provided as a separate working paper and not adjusted in the official Census report. Figure A provides some perspective on those changes along with other data changes in the last several years. Solid lines are reported CPS ASEC data; dashed lines prior to 2013 denote historical values imputed by applying the redesigned income methodology in 2013 to past trends; and the dotted lines since 2016 represent the new imputed values from the Census working paper on nonresponse rates.
The Census Bureau report on income, poverty, and health insurance coverage in 2019 reveals impressive growth in median household income relative to 2018 across all racial and ethnic groups, but income gaps persist. While the Census cautions that the 2019 income estimates may be overstated due to a decline in response rates for the survey administered in March of this year, real median household income increased 10.6% among Asian households (from $88,774 to $98,174), 8.5% among Black households (from $42,447 to $46,073), 7.1% among Hispanic households (from $52,382 to $56,113), and 5.7% among non-Hispanic white households (from $71,922 to $76,057), as seen in Figure A.
In 2019, the median Black household earned just 61 cents for every dollar of income the median white household earned (up from 59 cents in 2018), while the median Hispanic household earned 74 cents (unchanged from 2018).
Real median household income by race and ethnicity, 2000–2019
Note: Because of a redesign in the CPS ASEC income questions in 2013, we imputed the historical series using the ratio of the old and new method in 2013. Solid lines are actual CPS ASEC data; dashed lines denote historical values imputed by applying the new methodology to past income trends. The break in the series in 2017 represents data from both the legacy CPS ASEC processing system and the updated CPS ASEC processing system. White refers to non-Hispanic whites, Black refers to Blacks alone or in combination, Asian refers to Asians alone, and Hispanic refers to Hispanics of any race. Comparable data are not available prior to 2002 for Asians. Shaded areas denote recessions.
Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement Historical Poverty Tables (Table H-5 and H-9).
State and local governments still desperately need federal fiscal aid to prevent harmful austerity measures
In March and April of this year, the economy lost an unprecedented 22.1 million jobs. From May to August, 10.6 million of these jobs returned. But nobody should take excess comfort in the fast pace of job growth in those months. It was widely expected that the first half of jobs lost due to the COVID-19-driven shutdowns were going to be relatively easy to get back. But even with the jobs gained since April, the economy remains 11.5 million jobs below its pre-pandemic level in February, and the low-hanging fruit have been largely plucked. One of the key factors that will radically slow the pace of job growth in coming months is the looming state and local fiscal crisis. Using data from the recovery from the Great Recession, we simply show how state and local austerity and job loss can be a lagging indicator, putting severe downward pressure on growth even years after the official recession ends. We find:
- From the beginning of the Great Recession in January 2008 to the trough of state and local government employment, 566,000 state and local government jobs were lost.
- The state and local employment trough occurred in July 2013, more than five-and-a-half years after the official start of the Great Recession.
- During the official recession from January 2008 to June 2009, state and local governments actually added 142,000 jobs.
- In the first year of recovery (from June 2009 to June 2010), the state and local sector lost 215,000 jobs. The 73,000 jobs lost between December 2007 and June 2010 constituted just 0.3% of state and local employment. Even a year after the recession officially ended, cuts in the state and local sector were greatly softened by the substantial federal fiscal aid included in the American Relief and Recovery Act (ARRA).
- In the second year of recovery (from June 2010 to June 2011), the state and local sector lost 368,000 jobs. Job losses continued through July 2013, with another 250,000 jobs lost.
- State and local governments have already lost jobs during this contraction and are recovering more slowly than the private sector. Without federal aid now, more jobs—in both the public and private sectors—will be lost down the line.
These data are presented in Figure A. Figure B presents job losses for state and local and private-sector jobs, both indexed to their December 2007 business cycle peak. The upshot of this analysis for today’s policymakers is clear: The severe blow to state and local budgets caused by the coronavirus shock is going to drag on growth for years to come absent bold action from federal policymakers. In the case of the Great Recession, the combined effect of job cuts and cuts to other state and local spending delayed a full recovery to pre–Great Recession unemployment rates by more than four years. The lessons could not be more clear: Without substantial federal aid to state and local governments—and soon—our near-term economic future will be substantially worse.
This fact sheet provides key numbers from today’s new Census reports, Income and Poverty in the United States: 2019 and The Supplemental Poverty Measure: 2019. Each section has headline statistics from the reports for 2019, as well as comparisons with the previous year, with 2007 (the final year of the economic expansion that preceded the Great Recession), and with 2000 (the historical high point for many of the statistics in these reports). All dollar values are adjusted for inflation (2019 dollars). Because of a redesign in the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) income questions in 2013, we imputed the historical series using the ratio of the old and new method in 2013. All percentage changes from before 2013 are based on this imputed series. We do not adjust for the break in the series in 2017 due to differences in the legacy CPS ASEC processing system and the updated CPS ASEC processing system, but these differences are small and statistically insignificant in most cases. Also, there are significant concerns about data quality, given the fall in survey response rates. It appears that nonresponse biased income estimates up and poverty statistics down so the actual reported improvement should be taken with a grain of salt.
Median annual earnings for men working full time grew 2.1%, to $57,456, in 2019. Men’s earnings are up 3.0% since 2007, and are 3.6% higher than they were in 2000.
Median annual earnings for women working full time grew 3.0%, to $47,299, in 2019. Women’s earnings are up 9.0% since 2007, and are 15.7% higher than they were in 2000.
Median annual earnings for men working full time in 2019: $57,456
Change over time:
- 2018–2019: 2.1%
- 2007–2019: 3.0%
- 2000–2019: 3.6%
Median annual earnings for women working full time in 2019: $47,299
Change over time:
- 2018–2019: 3.0%
- 2007–2019: 9.0%
- 2000–2019: 15.7%
Former Federal Reserve Chair Alan Greenspan told CNBC last week that his “biggest concern” in regard to the economic outlook included too-high budget deficits. This concern is both completely misplaced and widely expressed.
We have already addressed a number of FAQs about deficits and debt. Besides those FAQs, however, another common question people ask is, “Where is the money the government borrows coming from?” Related to this fear is concern that the source of borrowing (whatever it is) might dry up at any time, and the result could be spiking interest rates that force firms to cut back on investment in productive private-sector investments, which in turn would slow economic growth in the future.
The short answers to these concerns are pretty simple: The money the government is borrowing comes mostly from ourselves, and that’s a key reason why we can be sure that interest rates won’t start rising unless and until we have reached a full recovery.
Below, we’ll explain what it means that federal budget deficits mostly amount to U.S. households borrowing from themselves.
In March and April this year, whole industries in which U.S. consumers spend money were shut down (restaurants, hotels, air travel, gyms, etc.). While there are some substitutes for some of this spending (when restaurants close, people tend to spend more money on groceries, for example), these offsets are nowhere near one-for-one. This means that as the places where people spend lots of money closed, households spent less. Because one person’s spending is another person’s income, as household consumption spending collapsed, market-based incomes collapsed in turn (i.e., workers in COVID-19-shutdown sectors stopped getting paychecks and business owners stopped earning profits).
Absent any policy response, a horrific vicious cycle would have started. Laid-off restaurant and airline workers would have cut back spending on everything—including spending in sectors that COVID-19 had not directly shut down. At that point, workers in non-coronavirus-affected sectors would have seen cuts to their incomes and reduced their own spending—and the downward cycle would continue. The few months of significant economic support provided by the CARES Act starting in April didn’t just provide vital income support to laid-off workers—it also broke this vicious cycle and put up a firewall between the coronavirus-driven shutdowns and the rest of the economy.
Raising the minimum wage to $15 by 2025 will restore bargaining power to workers during the recovery from the pandemic
The 1963 March on Washington for Jobs and Freedom demanded a federal minimum wage that would, as economist Ellora Derenoncourt has observed, be the equivalent in inflation-adjusted terms of almost $15.00 an hour today. While organizing efforts such as the “Fight for $15” have led to many minimum wage increases at the state and local levels, the current $7.25 federal minimum wage stands at less than half of that 57-year-old goal.
In spite of national grassroots efforts, Congress has failed for more than a decade to raise the federal minimum wage. Most recently, opponents have argued that the pandemic means that we still can’t afford to raise the minimum wage to the level sought by the civil rights movement back when John Kennedy was president.
In 1963, the applicable minimum wage varied by industry between $1.00 and $1.25 per hour, and there was no minimum wage at all for agriculture, nursing homes, restaurants, and other service industries that disproportionately employed Black workers. The March on Washington’s demands were for a $2.00 national minimum wage “that will give all Americans a decent standard of living” and to extend its coverage “to include all areas of employment which are presently excluded.” A few years later, Congress expanded the policy’s coverage to some of the previously excluded sectors and significantly raised the minimum wage, to $1.40 in 1967 and then $1.60 in 1968. Derenoncourt and Claire Montialoux demonstrated convincingly that these increases were responsible for more than 20% of the fall in the Black–white income gap during the Civil Rights Era.
But had policymakers met the original demands of the March on Washington, the minimum wage in 2020 would already be nearly $15 per hour. Concretely, as Figure A shows, if the minimum wage had been raised to $2.00 in 1963, with future increases tied to the cost of living, the minimum wage this year would be $14.79, more than twice its current value of $7.25. Instead, after it rose to the inflation-adjusted high point of $10.43 in 1968, infrequent increases since then have dramatically eroded its value.
On Tuesday, the Census Bureau will release its annual data on earnings, incomes, poverty, and health insurance coverage for 2019. There are a number of important things to know about this data release, including:
- These data report household incomes from 2019, not 2020. In short, this data will be silent on what has happened since the pandemic and ensuing recession hit the United States and resulted in widespread job loss and health devastation. It will, however, provide some insights into the labor market as we entered the current recession, which magnified deeply entrenched economic inequalities and racial and ethnic disparities.
- The data on incomes in 2019 was collected in February, March, and April of 2020. Its collection was likely extremely hampered by the COVID-19 pandemic. This could make it less reliable than previous year’s releases, and biases could be particularly large for low-income households.
- The data will give us insight into how evenly (or unevenly) economic growth has been distributed across U.S. households in 2019. Other data sources that are released more than once a year too often provide only averages or aggregates into what is happening in a particular month—but next week’s Census release gives a comprehensive picture of how the U.S. economy was working for typical households over the full year, including individual-, family-, and household-level data on annual earnings and incomes.
- The data are likely to show strong, relatively widespread income growth in 2019. Policymakers should take heed of this, as the root of this growth was a labor market approaching full employment, with the unemployment rate below 4% for the entire year.
UI claims rising as jobs remain scarce: Senate Republicans must stop blocking the restoration of UI benefits
Last week, total initial unemployment insurance (UI) claims rose for the fourth straight week, from 1.6 million to 1.7 million. Of last week’s 1.7 million, 884,000 applied for regular state UI and 839,000 applied for Pandemic Unemployment Assistance (PUA). A reminder: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits and expires at the end of this year.
Last week was the 25th week in a row total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn’t have PUA in the Great Recession), claims are still greater than the second-worst week of the Great Recession. (Remember that when looking back farther than two weeks, you must compare not-seasonally-adjusted data, because DOL changed—improved—the way they do seasonal adjustments starting with last week’s release, but they unfortunately did not correct the earlier data.)
Most states provide 26 weeks of regular state benefits. After an individual exhausts those benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of benefits that is available only to people who were on regular state UI. Given that continuing claims for regular state benefits have been elevated since the third week in March, we should begin to see PEUC spike up dramatically soon (starting around the week ending September 19—however, because of reporting delays for PEUC, we won’t actually get PEUC data from September 19 until October 8). It is also important to remember that people haven’t just lost their jobs. An estimated 12 million workers and their family members have lost employer-provided health insurance due to COVID-19.
Different economic crisis, same mistake: The Fed cannot make up for the Republican Senate’s inaction
- Following the Great Recession of 2008–2009, Congress did little to help recovery, and we relied almost exclusively on actions from the Federal Reserve to spur recovery. That was a mistake.
- It is Congress that has the tools that could end the economic crisis, and the Senate Republican caucus that is the roadblock to using these tools should be the focus of policy attention today.
- While the Fed has shown better judgement than Congress in the last economic crises, the tools they currently have are too weak to spur the needed recovery. In the end, there is no good substitute for a dysfunctional Congress—and today’s dysfunction is caused by Senate Republicans who refuse to act.
The economic shock of the coronavirus is very different from the housing bubble shock that caused the Great Recession of 2008–2009. Yet six months into the current crisis, we are in danger of repeating a same key mistake: leaning too hard on the Federal Reserve to navigate the crisis while ignoring the much more important role of a bloc in Congress that is blocking needed aid. While it is true that the Fed has shown better judgement over the course of this crisis, the tools it currently has available to address it are weak. The tools Congress has are strong, but their actions have been stymied by the mystifyingly bad judgement of Senate Republicans.
The Fed is an enormously powerful institution in many ways, but their policy tools are actually quite limited for boosting the economy out of a recession or even increasing the rate of growth during recoveries. The Fed can decisively slow economic expansions, and too often in the past they have done this explicitly to weaken workers’ bargaining position and keep wage-driven pressure on prices from forming. In short, the Fed has a powerful brake but a very weak accelerator, and their use of this brake has merited much criticism in the past.