Official numbers prove what we feel in our bones – the U.S. economy has hit the proverbial glass ceiling. On Thursday, the Labor Department reported that U.S. unemployment claims held steady at 884,000. This represents another sign that our economic recovery has flattened. The unemployment rate declined to 8.4% in August. It reached a peak of 15% in April. Before the pandemic, our unemployment rate was 3.5%.
The term “half loaf” might be applicable. Companies have hired back a fraction of their furloughed workers. Demand is not robust enough to operate at full staffing. There are job openings for 6.6 million workers. This up from 6 million at the end of June and down from 7.2 million one year ago.
The amount of job postings, a real-time measure of labor market activity, has slowed dramatically since late July. According to the job-search site Indeed.com, the number of postings remains 20% below 2019 levels. Nick Bunker, an economist at the Indeed Hiring Lab said, “The flattening trend in postings reflect the recent slowdown in demand for workers in some consumer-facing industries, such as food service, retail, hospitality and tourism. However, demand for labor in a few sectors such as construction has fully recovered to 2019 levels.”
Lowell Taylor, an economic professor at Carnegie Mellon University said, “The fact that people are still losing jobs this late after the start of the pandemic is really distressing.” Taylor thinks that the federal government should be on a wartime footing to overcome our current crisis.
Because COVID-19 remains a threat to our health, attempts to return to normalcy have been thwarted. California, Texas, Florida and Arizona have reimposed some restrictions but have not returned to the full lockdowns of the spring. California and New York have imposed some of the toughest restrictions, limiting the activity of their citizens and ordering all nonessential workers to stay at home. Orange County has permitted restaurants to provide indoor dining with a capacity at 25%, while indoor malls and retail stores could operate at 50% capacity. New York City will lift restrictions on indoor dining as of Sept. 30. It will allow indoor dining at 25% capacity, signaling to tourists and residents that the city is slowly returning to normal.
In part, the slowdown in economic activity is attributable to the failure of Congress to agree on an extension of unemployment-insurance benefits. It looks increasingly likely that Washington will be unable to reach a deal before the election.
The Republican $1 trillion package included federal aid for unemployed workers, small businesses schools and vaccine development. The Republican proposal set jobless benefits at $300 per week, half of the $600 of the earlier stimulus program. Democrats wanted the bill to include aid to state and local governments facing financial ruin.
Mark Zandi, chief economist at Moody’s Analytics, said: “If lawmakers do not quickly pass another sizable rescue package that includes help to state and local governments and more income support to the unemployed, then the economy will suffer another downturn.”
Economists at the Bank of America, based on credit card data, estimated that spending growth by unemployed beneficiaries fell between 7 and 18 percentage points in August. By contrast, spending by everyone else rose 2 to 4 points.
COVID-19 is profoundly affecting our lives. Isolation, contact restrictions and economic shutdowns impose a complete change to the psychosocial environment.
The risk of permanent damage to our economy remains high. Economists worry about the following scenario. That is, the longer the pandemic continues, it will cause businesses in the most vulnerable sectors to permanently close.
I am an all-or-nothing guy. However, I must defer to reality – half a loaf is better than none!
