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Surprise unemployment drop sparks debate over how fast the economy will rally

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The rate reflects parts of the economy reopening in the wake of the coronavirus pandemic.

An unexpected drop in the unemployment rate set off a fresh round of debate on Friday over how fast the economy can rebound from the coronavirus pandemic and how much the government should intervene to help.

The unemployment rate fell to 13.3 percent in May from a peak of 14.7 percent in April, the Bureau of Labor Statistics reported — surprising economists who had widely expected the rate to jump to about 20 percent in May, given that more than 40 million people have applied for unemployment benefits in recent weeks.

The economy gained 2.5 million jobs last month, as states started relaxing stay-at-home orders and opening for business. Markets rallied on the news, with the S&P 500 gaining nearly three percent by mid-day. The Dow Jones Industrial Average was up 3.8 percent.

President Donald Trump and his economic advisers, who have been prodding governors to relax stay-at-home orders, said the numbers show the economy will recover as quickly as they have been predicting. Trump at a Friday news conference compared the pandemic to a short-lived natural disaster and said the numbers are evidence of the “greatest comeback in American history.” 

But some economists warned that the unemployment rate is still at highs not seen since the Great Depression — and that it remains hard to predict whether and how rapidly the upswing will continue. The nonpartisan CBO has estimated that unemployment won’t even near pre-pandemic levels — which was at 3.5 percent in February— by the end of next year.

“The next few months really will reveal a lot,” said Heidi Shierholz, an economist at the left-leaning Economic Policy Institute. “It is very, very hard to measure things right now.” 

The economy lost 22 million jobs in March and April, so is still down 19.6 million jobs, Shierholz said.

Some economists warned that the unexpected number likely understates the extent of the economic pain felt last month. Large numbers of people have been classifying themselves as employed but absent from work in the Labor Department’s survey, and that can artificially suppress the unemployment rate. 

Mark Hamrick, senior economic analyst for Bankrate, cautioned that the May unemployment rate would have been 3 percentage points higher if those workers had been properly recorded.

“You know there’s a lot going on here,” said Hamrick, “One of the very challenging aspects of getting our arms around the current situation is that statistics are fairly stable when the economy is stable, and when the economy is rapidly changing the statistics are rapidly changing as well.”

Hamrick said the unexpected number reflects the “dynamism of the situation,” and the fact that economists have been relying on the weekly unemployment claims figure to measure the recent job losses. 

The unemployment figure reported Friday reflects the situation in the middle of May, which is when the agency surveys Americans to get a snapshot of the workforce.

The lower-than-expected number may also be related to a 15 percent drop in responses to the household survey, which the Labor Department uses to estimate the number of people who are employed. 

“We’re in this moment where we don’t have the luxury of reading and seeing, we have to try to interpret what’s going on,” said Shierholz, who is also a former chief economist at the Labor Department. 

She noted that the positive report indicates the flurry of coronavirus relief bills enacted in recent months to help keep the economy afloat during the pandemic appear to be working.

“The provisions that we’ve implemented, are sustaining income, which means that as things reopen there is confidence and demand there to get people back to work,” Shierholz said. 

The news wasn’t all positive. While the unemployment rate for adult women, adult men, white workers, Hispanic workers dropped from April to May, it rose slightly for black workers to 16.8 percent.

And the number of workers who said they have permanently lost their jobs increased by 295,000 in May to 2.3 million.

The leisure and hospitality industry, which was battered by state stay-at-home orders and shed more than 8 million jobs in April and March, added 1.2 million jobs last month. 

But even as jobs gains were seen elsewhere, employment in government continued to decline, shedding 585,000 jobs in May for a total loss of 1.5 million jobs in two months. 

Most of those losses were in local government — a major employer for black workers, and one factor contributing to the black unemployment rate holding steady even as the overall rate declined.

The jobless rates for teenagers (29.9 percent) and Asians (15 percent) also saw little change from April to May. 

The May jobs report lands amid a debate in Washington over whether to extend the unemployment benefit program created to help jobless Americans weather the pandemic. 

With more than 40 million unemployment claims filed throughout the pandemic, Republicans argue that an additional $600 weekly unemployment payment authorized in a March assistance bill will discourage Americans from getting back to work and stymie the recovery. 

But, former congressional economists from both Republican and Democratic administrations warned lawmakers earlier this week that more aid may be needed. 

A failure to extend the benefits will “hinder our ability to recover,” said Douglas Elmendorf, who led the Congressional Budget Office from 2009 to 2015. He said benefits should stay in place until the national jobless rate falls back down to 6 percent.

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

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Mounting unemployment crisis fuels racial wealth gap

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Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show.

The economic meltdown that has devastated the country amid the coronavirus pandemic has proven uniquely damaging for black Americans, threatening to exacerbate an already staggering racial wealth gap and fueling nationwide protests focused on racial justice.

Black workers are more likely to be out of a job, to have lost income or to have left the labor market altogether, economic data and surveys show — and less than half of black adults are now employed. More than 1 in 6 black workers was out of a job in May, the Labor Department reported Friday, and the black unemployment rate continued to rise even as the overall rate ticked downward.

Black workers are also more heavily represented in frontline industries that leave them more likely to be exposed to the coronavirus — which has been killing disproportionate numbers of black Americans — and less likely to be able to work from home.

At the same time, black Americans have also historically earned lower wages, owned fewer homes and accumulated less wealth than their white counterparts, leaving them less able to weather an extended period of time with little or no income. And economists warn that long-term economic effects are likely to be more damaging for workers of color.

“Every corner of inequality has been exposed,” said Lisa Cook, an economics and international relations professor at Michigan State University who served on the Council of Economic Advisers during the Obama administration. “From the health care system, to wealth data, to income data, to occupational discrimination — all of it seems to be laid bare right now.”

The 16.8 percent jobless rate for black workers in May compares to 12.4 percent for white workers — a sizable gap but not a dramatic one for a statistic that is typically twice as high for black workers, even in strong economies. Still, it marks a stunning reversal for African Americans, who were finally starting to reap the benefits from a decade of economic expansion and hit their lowest-ever unemployment rate of 5.4 percent late last summer.

While it took 10 years for the employment rate for black workers of prime working age to climb 10 points, for example, those gains are likely to be wiped out in a matter of months, said Janelle Jones, managing director for policy and research at Groundwork Collaborative, an advocacy group promoting progressive economic causes.

“When the economy bounces back,” she said, “we know that it’s not going to bounce back as quickly for black workers.”

The composition of the labor market also leaves black workers at heightened risk of long-term unemployment compared to white workers. Workers of color are more heavily represented in jobs with higher risk of coronavirus exposure — customer service, food service and security, for example — which were hit first and hardest and are likely to be among the last to come back, according to a new analysis led by PolicyLink and funded by JPMorgan Chase.

Some of those concerns may have already begun to play out. The May jobs report showed an unexpected drop in the overall unemployment rate as the economy gained jobs in industries like hospitality and construction. But jobs in local government, where black workers are heavily employed, continued to drop sharply.

As a result, the white unemployment rate dropped nearly 2 percentage points — while the black unemployment rate rose 0.1 percentage point.

In other areas, too, black workers and families are bearing the brunt of the deep recession being felt across the country. More than 55 percent of black households report having lost employment income since mid-March, according to a Census survey released this week, as compared to 43 percent of white households.

And any signs of recovery could be just as uneven: More than 2 in 5 black households expect to continue losing income over the next month, the survey showed, while just over a quarter of white households reported the same.

“So you can imagine the financial strain that a lot of these families are under,” said Connor Maxwell, a senior policy analyst at the left-leaning Center for American Progress. “Even if they’re able to get jobs after this recovery, are they going to be able to bounce back economically the same way as a lawyer who has been working remotely for the past three months?”

Economists and analysts are increasingly calling on Congress to step in to boost recovery efforts, allocate more aid and ensure the funding that is available is being distributed evenly.

The Paycheck Protection Program, in its initial iteration, offered an early warning sign of how hundreds of billions in government-backed loans allocated to support small businesses could be less accessible for those with black owners, in part because they are less likely to have had relationships with major banks.

As a result, a Goldman Sachs survey from late April found only 79 percent of black business owners had applied for a PPP loan versus 91 percent overall. And those who did apply had more trouble earning approval: Only 2 in 5 black applicants were approved, Goldman found, compared to 52 percent of business owners overall.

In the same way that black Americans lost their homes at far higher rates than their white counterparts during the Great Recession — a factor that contributed to the uneven recovery — there’s concern that black business owners could now be more at risk of losing their livelihoods.

“This is a traditional entry point to the middle class,” Cook said. And if businesses are forced to close, “there will be another major setback to wealth accumulation in this country.”

That could worsen the already stark racial wealth gap: In 2016, the net worth of an average white family was 10 times that of an average black family — $171,000 versus $17,150.

Labor advocates and the AFL-CIO are also calling on lawmakers to extend the boosted unemployment insurance benefits that are currently set to expire at the end of July, noting that doing so would help all jobless workers but particularly minorities being hit the hardest. Democratic leaders in both chambers are also supportive of a push to automatically tie unemployment aid to the condition of the economy.

Jones of the Groundwork Collaborative noted lawmakers could go further and link benefits to regional unemployment rates, adding: “I don’t want to stop giving people help because New York and California have recovered but the South hasn’t.”

Others say Congress could take additional steps to provide rental assistance, given that people of color are less likely to own their homes, and provide hazard pay for essential workers, who are disproportionately workers of color.

“Congress knows that recessions hit black households harder, and it also knows that it has the power to take action that will weaken the recession and strengthen the recovery,” Heidi Shierholz, a senior economist at the Economic Policy Institute, wrote on Thursday. “If it doesn’t act, it will be yet another assault on black people.”

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

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2.1 million new unemployment claims filed last week, as workers still struggle to get benefits

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The ten-week total for claims reached 40.8 million, suggesting about a quarter of the workforce has lost jobs during the coronavirus pandemic.

Workers filed 2.1 million new unemployment claims last week, the Department of Labor reported, suggesting about a quarter of the workforce is seeking jobless aid to weather the economic crisis caused by the coronavirus. 

The latest figure indicates that the pandemic has pushed 40.8 million Americans out of work in just 10 weeks.

DOL also reported that another 1.2 million people applied for benefits under the new temporary Pandemic Unemployment Assistance programcreated for individuals who are typically ineligible for unemployment insurance, such as self-employed workers.

With those people added, the number of claims filed last week could be as high as 3.1 million, though there could be some overlap between the new program and traditional unemployment benefits.

“The pace of flooding has declined, but the labor market is still underwater,” Nick Bunker, Indeed Hiring Lab’s director of economic research, said in reaction to the numbers. He said the raw unadjusted number of new claims reported last week is still 15 times higher than pre-coronavirus levels.

California saw the highest number of new claims last week, reporting an estimated 212,343 new applications filed. New York followed with an estimated 192,193 new claims. 

Roughly half of those who applied for benefits since the beginning of the pandemic are now receiving them, according to Andrew Stettner, senior fellow at The Century Foundation. But legal advocates and worker groups complain that workers in many states are still facing long waits, glitches and little assistance in accessing the aid from state agencies, leading applicants in some cases, to give up. 

Three Uber and Lyft drivers, along with the New York Taxi Workers Alliance, filed a federal complaint this week against the state of New York, alleging the length of time it’s taking the state to process their claims compared to other workers has been “devastating.”

Behnaz Mansouri, an attorney at the Unemployment Law Project in Washington state, said roughly 60,000 people who’ve filed claims there are still waiting to receive benefits. She said self-employed workers are facing the greatest hurdles in getting jobless aid from the new federal program.

“They’re not only getting requests for more information they’re getting conflicting requests” for employment information, Mansouri said. “And these claimants don’t know what to do.” 

In Florida, where the state inspector general has launched a probe into its error-ridden unemployment assistance system, the state says about 83 percentof the 1.9 million claims its verified have been processed, an improvement from the less than 6 percent it reported mid-April

But Laurie Yadoff, an attorney at Coast to Coast Legal Aid of South Florida, said her clients complain their applications are still “pending” and are still unable to get through to state unemployment offices for assistance. 

“It’s been a tremendous struggle and a couple of my clients I have to keep calling them and telling them to hang in there,” Yadoff said. “They just keep saying, ‘What’s the point?’”

And not every state has implemented the new unemployment programs provided under the massive coronavirus relief package signed into law in March. 

According to DOL, so far, only 32 states have begun paying out the 13-week extension of unemployment benefits included in the CARES Act. Most states provide an average of 26 weeks of jobless benefits. 

While the number of Americans seeking jobless benefits has slowly declined over the past several weeks, economists forecast that the share of the workforce out of a job will remain high throughout the summer. 

“Although initial claims are declining, the pace may only be plateauing,” Glassdoor Senior Economist Daniel Zhao said in a statement. “If UI claims remain in the millions for the next few weeks, it may signal that relaxed state-mandated restrictions alone aren’t enough to staunch the flow of unemployed Americans.”

Kevin Hassett, senior economic adviser to President Donald Trump predicted the unemployment rate could potentially shoot north of 20 percent in the Bureau of Labor Statistics’ May jobs report out June 5. He expects the jobless rate will continue to climb in June, “but then after that it should start to trend down,” he told CNN on Sunday.

Despite warnings from economists that unemployment could remain high into the end of next year, Republicans in Congress have made clear that they won’t support expanding the enhanced unemployment insurance benefits provided under one of the coronavirus rescue bills.

Democrats want to extend that weekly $600 boost to unemployment insurance payments through the end of January. It is currently due to expire at the end of July.

Instead, National Economic Council Director Larry Kudlow said Tuesday the Trump administration “may well” support including a bonus to get workers back on the job in the next coronavirus aid package. He argues the enhanced unemployment payments are so high that they act as a “major disincentive to go back to work.”

This blog originally appeared at Politico on May 28, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

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California lawmakers blast ‘atrocious’ UI system overloaded with 4.9M claims

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SACRAMENTO — California state lawmakers unleashed their frustrations about the state’s unemployment system Thursday, demanding answers from an agency director about the problems their jobless constituents have endured trying to access the financial lifeline during the pandemic. 

“We’ve never heard the type of suffering people are experiencing right now,” said Assemblyman David Chiu (D-San Francisco). “The feedback we’re getting is atrocious.”

The comments at a budget subcommittee hearing came hours after the U.S. Department of Labor released data showing California’s number of pandemic-induced unemployment claims had climbed to nearly 4.9 million — about 25 percent of California’s pre-pandemic workforce. The avalanche of claims has overwhelmed the state’s Employment Development Department and its aging technology systems, sending many desperate residents to lawmakers for help.

Lawmakers told the agency’s director, Sharon Hilliard, that their staff had been flooded with calls from constituents struggling to learn about the status of their claims or unable to reach EDD staff to have their questions answered. They cited a litany of problems, from delayed claims updates — provided by regular mail — to a lack of capacity to assist workers who speak languages besides English and Spanish, which Chiu said was a civil rights concern. 

Constituents desperate for a lifeline will call the department, make their way through an automated menu and then get “hangups, for Pete’s sake,” said Assemblyman Tom Lackey (R-Palmdale).

“Even from some of the live calls we have hangups,” he added, referring to residents being dropped mid-call. “That’s really unacceptable.”

Hilliard did not refute the criticism, but explained that the agency — staffed earlier in the year for an unemployment rate of a mere 3.9 percent — had to rapidly escalate its operations.

“I don’t like it either,” she said. “I totally agree with you. It’s not acceptable.”

She said agency leaders expect to hire some 1,700 people in the next two weeks and upgrade the IT system as was planned before the pandemic, choosing a new vendor this fall. In response to lawmakers’ questions, she said the department was considering ways to send certain notifications by email and how to alert people more quickly if there were errors or missing information on their applications that could delay payments. 

Assemblyperson Buffy Wicks (D-Oakland) said she had some sympathy for the department. But, she said, “I have more sympathy for the folks in my district, many of whom were already living on the brink of poverty.”

This blog originally appeared at Politico on May 21, 2020. Reprinted with permission.

About the Author: Katy Murphy covers consumer regulations with a focus on data privacy for POLITICO California. Before joining the team, she was a one-woman Capitol bureau for the The Mercury News and East Bay Times and previously covered K-12 and higher education for more than a decade, based in the Bay Area.

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Unemployment claims rise by 2.4 million as states try to open for business

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A total of 38.6 million workers have now applied for unemployment assistance over the past nine weeks.

Another 2.4 million workers filed new unemployment claims last week, DOL reported, suggesting that the economic pain from the coronavirus is continuing even as states begin to allow businesses to reopen.

The coronavirus has forced nearly 39 million Americans out of work and onto state jobless benefit rolls in nine weeks, leading to levels of unemployment not seen since the Great Depression of the 1930s.

“The coronavirus crisis continues to inflict swift and deep impacts on the labor market at a near unprecedented clip,” Glassdoor Senior Economist Daniel Zhao said in reaction to the numbers. “While recent indicators show the initial steep job declines are slowing, the labor market remains in a deep hole it will have to climb out of.”

Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute, noted that the number of new claims filed last week is likely closer to 4.4 million, based on how DOL now separates its data.

The unadjusted raw number of claims filed in regular state unemployment programs last week totaled at 2.2 million workers. But the report indicates another 2.2 million Americans also sought jobless aid under the new temporary Pandemic Unemployment Assistance program.

California saw the highest number of new claims last week, with an estimated 246,115 applications filed. New York followed with an estimated 226,521 new claims.

While the number Americans seeking jobless benefits has slowly declined over the past several weeks, some economic forecasts also suggest that huge swaths of the workforce could remain unemployed for a prolonged period.

The nonpartisan CBO warned in an update to its economic forecast Tuesday that unemployment will rise to 16 percent in the third quarter if a small business lending program created in a coronavirus stimulus package expires. By the end of 2021, the agency projects unemployment will still be as high as 8.6 percent. 

Federal Reserve officials said they worry the U.S. could be facing a long and severe recession if there are multiple outbreaks of coronavirus as lockdown orders are relaxed, in minutes of their April meeting released Wednesday. The central bank officials cited an “extraordinary amount of uncertainty and considerable risks.”

Andrew Stettner, senior fellow at The Century Foundation said that in the 35 states that have begun to open their economies statewide, “initial claims only declined by 14 percent last week from the prior week.”

He said the data shows reopening the economy “does not necessarily equate with robust rehiring,” pointing out that among those 35 states, nine actually saw an increase in the number of new workers claiming benefits.

In Washington, Democrats and Republicans hold different views about whether another round of unemployment and small business aid is needed.

The House last Friday passed a mammoth $3 trillion stimulus bill that would expand some unemployment benefits and provide more direct payments to the public.

But Republicans and the Trump administration have said they want to wait and see the effect of three relief packages passed in March, and instead are moving forward on proposals to shield businesses from coronavirus-related lawsuits.

President Donald Trump has also signaled he opposes extending the weekly $600 boost in unemployment insurance authorized in one of the coronavirus rescue bills that is due to expire at the end of July.

Democrats’ latest $3 trillion coronavirus relief package would extend that sweetener through Jan. 31.

This blog originally appeared at Politico on May 21, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

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Fed’s Powell warns unemployment could reach Depression-level 25 percent

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Federal Reserve Chair Jerome Powell on Sunday warned that the nation’s unemployment rate could soar to 25 percent during the worst of the coronavirus crisis, though he said the economy should recover more quickly than during the Great Depression, when joblessness last reached those levels.

“Those numbers sound about right for what the peak may be,” Powell said on CBS’ “60 Minutes” after reporter Scott Pelley asked whether unemployment could reach 20 percent or even 25 percent.

His remarks came just days after the central bank released a survey showing that one in five American workers lost their jobs in March — including almost 40 percent of those in lower-income households.

The Fed chief expressed hope that the economy would come out of recession in the second half of the year, but cautioned that a second outbreak of the coronavirus could derail that path.

“This economy will recover,” he said. “We’ll get through this. It may take a while. … It could stretch through the end of next year. We really don’t know.”

The central bank has taken extraordinary measures to rescue the economy since the pandemic began sweeping through the country — slashing interest rates to zero, rolling out trillions of dollars in lending programs for financial markets, and taking the unprecedented step of bailing out state and city governments.

“There’s really no limit to what we can do with these lending programs,” Powell said. “There’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”

He said the economy stands a good chance of bouncing back more quickly than in the 1930s.

“When the Depression, well, when the crash happened and all that, the financial system really failed,” Powell said. “Here, our financial system is strong.”

But he took the opportunity to again warn that Congress will need to spend more to prevent long-lasting damage, even after U.S. lawmakers have shelled out trillions of dollars for American businesses and consumers.

The most important policy objectives should be to “keep workers in their homes, keep them paying their bills,” he said. “Keep families solvent so that when this comes, we come out the other end of this, we’re in a position to have a strong recovery.”

This blog originally appeared at Politico on May 17, 2020. Reprinted with permission.

About the Author: Victoria Guida is a financial services reporter covering banking regulations and monetary policy for POLITICO Pro. She covers the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency, as well as Treasury, after four years on the international trade beat, most recently for Pro and previously for Inside U.S. Trade.

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Labor Department reports 36.5 million unemployment claims over 2 months

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Thursday’s report brought the eight-week total of coronavirus-induced layoffs to 36.5 million.

Workers filed nearly 3 million new unemployment claims last week, the Labor Department reported Thursday, signaling that a wave of coronavirus-induced layoffs is continuing as the country struggles to reopen for business.

The latest number, which covers the week ending May 9, pushed the two-month tally of unemployment claims to 36.5 million, reflecting a jobless rate that the Bureau of Labor Statistics acknowledged last week is the worst since the Great Depression of the 1930s.

The figure is “another sickening punch to the gut,” Mark Hamrick, senior economic analyst for Bankrate, said in a statement. “And, we need to be braced for more incoming body blows with respect to economic data,” he said.

As high as the official unemployment rate is — BLS said it reached 14.7 percent in April — that likely understates the damage, because large numbers of people misclassified themselves as employed but absent from work, artificially suppressing the jobless rate by about five percentage points.

Unemployment claims by week

“We’re going to see high levels of unemployment for a long time, meaning nine to 18 months,” predicted Tom Gimbel, founder & CEO of LaSalle Network, a national staffing and recruiting firm. “The whole labor model is going to change.”

As most states begin allowing non-essential businesses to reopen their doors, Gimbel said he expects many companies to favor temporary over permanent hiring.

“We’ll see an increase in temporary staffing, because companies are going to be concerned about a resurgence,” Gimbel said. “People don’t want to commit to full-time staff.”

Workers who are called back face a choice between potentially risking their health or losing unemployment benefits. On Monday, DOL “strongly encouraged” state unemployment agencies to find out from employers whether benefit recipients refuse to return to work, as federal guidelines dictate that those workers will no longer be eligible.

The data released by DOL Thursday also indicated that self-employed workers who were made eligible for jobless benefits under a new temporary program, Pandemic Unemployment Assistance, have finally begun to tap into the relief.

In the week ending April 25, 3.4 million Americans were receiving benefits from the program, up from fewer than 1 million the week prior.

In Washington, lawmakers have been unable to agree on next steps to address the economic pain caused by the virus.

House Speaker Nancy Pelosi has scheduled a vote Friday on a new $3 trillion relief package that would include an extension through January of the $600 sweetener to weekly unemployment checks, which is set to expire at the end of July, and another round of direct payments. President Donald Trump and Senate Republicans oppose the plan, and say they prefer to assess the effects of the $2 trillion CARES Act.

But Federal Reserve Chair Jerome Powell said Wednesday that further congressional stimulus would be worth the price.

“The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” Powell said at a virtual event hosted by the Peterson Institute for International Economics. “Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”

The Fed chief said the central bank will release a survey on Thursday showing that nearly 40 percent of people in households making less than $40,000 a year had lost a job in March.

Over the short term, financial losses are already devastating. About half of Americans say they’ve lost income and savings due to the effects of the coronavirus, a National Bureau of Economic Research survey found. On average, those Americans said they’ve lost $5,293 in income and $33,482 in wealth.

This blog originally appeared at Politico on May 14, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

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Economy Loses 20.5 Million Jobs in April; Unemployment Jumps to 14.7%

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The U.S. economy lost 20.5 million jobs in April, taking payroll employment back to levels last seen in spring 2011 when the economy was recovering from the Great Recession, and the unemployment rate jumped by a historic amount to 14.7%, according to figures released Friday by the U.S. Bureau of Labor Statistics. The unemployment rate for white males is 12.4%, the largest for white men in the post-World War II era and the first time it has been in double digits since that era.

Every sector saw job losses in April. The largest losses were in leisure and hospitality (-7.7 million), education and health services (-2.5 million), professional and business services (-2.1 million), retail trade (-2.1 million), manufacturing (-1.3 million), other services (-1.3 million), government (-980,000), construction (-975,000), transportation and warehousing (-584,000), wholesale trade (-363,000), financial activities (-262,000), information (-254,000), and mining (-46,000).

In April, unemployment rates rose among all major worker groups. The rate was 31.9% for teenagers, 18.9% for Hispanics, 16.7% for blacks, 15.5% for adult women, 14.5% for Asians, 14.2% for whites and 13.0% for adult men. The rates for all of these groups, except black Americans, represent record highs in the history of this measure.

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 225,000 in April and accounted for 4.1% of the unemployed, as a sign of discouraged workers.

This blog originally appeared at AFL-CIO on May 8, 2020. Reprinted with permission.

About the Author: Kenneth Quinnell is a long-time blogger, campaign staffer and political activist. Before joining the AFL-CIO in 2012, he worked as labor reporter for the blog Crooks and Liars.

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Mass Unemployment Is a Failure of Capitalism

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The difficulties caused to workers by record unemployment during the pandemic are a product of capitalism. Most of the time, employers decide to hire or fire workers depending on which choice maximizes employers’ profits. Profit, not the full employment of workers nor of means of production, is “the bottom line” of capitalism and thus of capitalists. That is how the system works. Capitalists are rewarded when their profits are high and punished when they are not. It’s nothing personal; it’s just business.

Unemployment is a choice mostly made by employers. In many cases of unemployment, employers had the option not to fire employees. They could have kept all employed but reduced their hours or days or else rotated off-work times among employees. Employers can choose to retain idled employees on payrolls and suffer losses they hope will be temporary.

However, unemployment is received almost everywhere and by almost all as a negative, unwanted experience. Workers want jobs. Employers want employees producing profitable output. Governments want the tax revenues that flow from employees and employers actively collaborating.

So why has the capitalist system periodically produced economic downturns wherever it has settled across the last three centuries? They have happened, on average, every four to seven years. The United States has had three crashes so far this century: “dot-com” in 2000; “sub-prime mortgage” in 2008; and now “coronavirus” in 2020. Thus the United States conforms to capitalism’s “norm.” Capitalists do not want unemployment, but they regularly generate it. It is a basic contradiction of their system.

There are good reasons why capitalism produces and reproduces unemployment over time. It draws benefits (as well as suffers losses) from doing so. Reproducing a “reserve army of the unemployed” enables periodic upsurges in capital investment to draw more employees without driving up wages. Rising wages—and thus falling profits—would accompany investment surges if all workers were already fully employed before such surges. Unemployment also disciplines the working class. The unemployed, often desperate to get jobs, give employers the opportunity to replace existing employees with unemployed candidates willing to work for less. Unemployment thus operates as a downward pressure on wages and salaries and thereby a boost for profits. In short, capitalism both wants and does not want unemployment; it expresses this tension by periodically adding to and drawing down a reserve army of the unemployed that it continually maintains.

That reserve army exposes a stark reality that no ideological gloss ever fully erases. While unemployment serves capitalism, it does not well serve society. That key difference is most glaringly in evidence when unemployment is very high, as it is today. Consider that today’s many unemployed millions continue much of their consumption while ceasing much of their production. While they continue to take their means of consumption from socially produced wealth, they no longer produce nor thereby add to social wealth as they did when employed.

Unemployment thus entails wealth redistribution. Part of the wealth produced by those who are still employed must be redistributed away from them and to the unemployed. Taxes accomplish that redistribution publicly. Employees and employers, labor and capital struggle over whose taxes will fund the consumption of the unemployed. Such redistribution struggles can be and often are bitter and socially divisive. In the private sphere of households, portions of the incomes and wealth of the employed likewise get redistributed to enable consumption by the unemployed: spouses share, as do parents and children, relatives, friends, and neighbors. Working classes always redistribute their incomes and wealth to cope with the unemployment capitalism so regularly imposes on them. Such redistributions typically cause or aggravate many tensions and conflicts within the working class.

Many public and private redistribution struggles could be avoided if, for example, public re-employment replaced private unemployment. If the state became the employer of last resort, those fired by private employers could immediately be rehired by the state to do socially useful work. Governments would stop paying unemployment benefits and instead pay wages to the re-employed, obtain in return real goods and services, and distribute them to the public. The 1930s New Deal did exactly that for millions fired by private employers. A similar alternative to private capitalist employment and unemployment (but not part of the New Deal) would be to organize the unemployed into worker co-op enterprises performing socially useful work on contract with the government.

This last alternative is the best because it could develop a new worker-co-op sector of the U.S. economy. That would provide the U.S. public with direct experience in comparing the capitalist with the worker-co-op sector in terms of working conditions, product quality and price, civic responsibility, etc. On that concrete, empirical basis, societies could offer people a real, democratic choice as to what mix of capitalist and worker-co-op sectors of the economy they prefer.

This article was produced by Economy for All, a project of the Independent Media Institute.

About the Author: Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His two recent books with Democracy at Work are Understanding Marxism and Understanding Socialism, both available at democracyatwork.info.

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Unemployment claims near 17 million in three weeks as coronavirus ravages economy

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Rebecca Rainey
Quint Forgey

Unemployment claims remained high last week at 6.6 million, the Labor Department reported, as massive job losses continued to pile up due to the coronavirus pandemic.

The claims, for the week ending April 4, flooded in as confirmed coronavirus cases approached 300,000 and as nearly every state ordered its citizens to stay at home. Economic forecasts that predict unemployment will exceed its historic 25 percent peak during the Great Depression are becoming routine, and the number of jobs lost in a mere three weeks now exceeds the 15 million that it took 18 months for the Great Recession to bulldoze from 2007 to 2009.

“In its first month alone, the coronavirus crisis is poised to exceed any comparison to the Great Recession,” said Glassdoor Senior Economist Daniel Zhao in a statement. “The new normal for UI claims will be the canary in the coal mine for how long effects of the crisis will linger for the millions of newly unemployed Americans.”

The jobless claims are mounting as the federal government struggles to release waves of aid to the economy and businesses shutter. The Federal Reserve on Thursday unveiled emergency programs that could dole out more than $2 trillion in loans to businesses of all sizes, as well as to struggling state and city governments. Democrats and Republicans in the Senate clashed Thursday over a new aid package aimed at bolstering the $2 trillion economic rescue deal that lawmakers approved in March.

The 16.8 million unemployment claims, filed between March 15 and April 4, translate to more than one in 10 workers seeking jobless benefits. “We are nowhere near the end of this,” tweeted Heidi Shierholz, policy director at the left-leaning Economic Policy Institute. “The labor market has been upended.”

State unemployment agencies and the Department of Labor continued to struggle to process claims from a pool of eligible workers that now includes gig workers, independent contractors and workers who in ordinary times wouldn’t have worked long enough to qualify for benefits, but became eligible as a result of Congress’ $2 trillion coronavirus rescue package last month. That bill also increased employment benefits by $600 across the board.

The 6.6 million claims filed last week would have set a record going back to 1967, when the Labor Department’s data series began, had the previous two weeks’ claims not done so already.

“This is a catastrophe,” said Rep. Don Beyer (D-Va.), vice chairman of the congressional Joint Economic Committee, in a statement. “Nearly 17 million Americans have lost their jobs and they likely won’t find another one until the contagion is under control — and that may be a long way off.”

The Bureau of Labor Statistics reported last week that U.S. employers shed 701,000 jobs in March, pushing the unemployment rate up to 4.4 percent, but the survey week for that figure was mid-March, before the crush of claims began. Most estimates put the current unemployment rate in the double digits or close to it.

As policymakers struggled to come to terms with the economic fallout from the pandemic, one economist suggested last month’s expansion of unemployment benefits, including $600 added to every unemployment check through July, could blunt losses from mass layoffs.

Although the unemployment rate “could rise even higher over the coming months,” wrote Andrew Hunter, senior U.S. economist at Capital Economics, “the damage in terms of lost income may end up being less severe.”

DOL again attributed the jump in claims to the spread of Covid-19, the illness caused by the novel coronavirus. In previous weeks, the agency said the claims were concentrated in the services industries, as well as the health care, manufacturing, retail and construction industries.

The greatest number of new unemployment claims were in California, which processed an estimated 925,450 claims last week. America’s most populous state was an early hot spot for the coronavirus’ spread across the country.

Gov. Gavin Newsom said Wednesday that California had processed 2.4 million applications in the three weeks since mid-March, accounting for more than 12 percent of the state’s civilian workforce.

After California, Georgia was second with 388,175 new claims filed last week.

New York — the current epicenter of the outbreak in the U.S., with more than 149,000 Covid-19 cases — reported more than 345,200 new unemployment claims, according to the federal data.

Although that number is lower than the roughly 366,600 filings two weeks ago, the state government’s failure to process a deluge of inquiries clouded the total count of jobless New Yorkers.

Since March 9, New York has received 800,000 unemployment claims and processed about 600,000 of those filings, Gov. Andrew Cuomo’s office said Thursday. The state’s new online system to apply for unemployment compensation is scheduled to go live later Thursday evening.

In New Jersey, the state Department of Labor reported an all-time record of nearly 215,000 residents filed for unemployment benefits last week,bringing the state’s claims to nearly 577,000 for the three-week period that began March 15.

After New York, New Jersey has the most confirmed cases of Covid-19 in the country — more than 47,000 — and Gov. Phil Murphy has warned the state could soon experience a wave of infections similar to those seen in New York City.

The unemployment figures showed Florida was slightly less hard-hit, with 170,000 claims filed last week in the nation’s third largest state, a decrease from the record 228,000 residents who sought unemployment benefits two weeks ago.

The actual number of Floridians out of work is likely higher, however, as technical glitches with the state’s unemployment benefits website have left the overloaded online system inaccessible for tens of thousands of residents.

The pandemic’s international economic toll was also laid out in devastating detail Thursday in Canada’s latest federal employment report, which revealed America’s neighbor to the north lost more than a million jobs in March.

That decline, which represented 5.3 percent of the jobs in a country of 37 million people, helped drive Canada’s unemployment rate from 5.6 percent in February to 7.8 percent — its largest one-month increase since comparable data became available in 1976.

Joe Anuta, Andy Blatchford, Gary Fineout, Katherine Landergan and Katy Murphy contributed to this report.

This article was originally published at Politico on April 9, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

Rainey holds a bachelor’s degree from the Philip Merrill College of Journalism at the University of Maryland.

She was born and raised on the eastern shore of Maryland and grew up 30 minutes from the beach. She loves to camp, hike and be by the water whenever she can.

About the Author: Quint Forgey is a breaking news reporter for POLITICO.

Quint previously worked as a digital producer and editorial intern for POLITICO, a freelancer and news intern for The Wall Street Journal, an associate producer for Louisiana Public Broadcasting, a reporting intern for The News Journal in Delaware, and a national reporting fellow for the Carnegie-Knight News21 program.

Quint graduated from Louisiana State University, where he served as editor in chief of the student newspaper, The Daily Reveille.Quint Forgey

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