Friday’s jobs report contained some good news, but the political forecast for more measures that might boost the economy is decidedly more mixed. I spoke with business columnist Josh Barro about the central takeaways.
Ben: This morning’s jobs report showed that unemployment in America has fallen from 10.2 percent to 8.4 percent (an artificially large drop because of the temporary hiring of census workers) and that 1.37 million new jobs were created in August, beating expectations of 1.35 million. So there’s some good news, but businesses are bringing furloughed workers back at a slower pace than they were, and, of course, millions remain jobless. What were your central takeaways from this snapshot of the economy?
Josh: This was a good report. As you note, it is somewhat inflated by census hiring of about 240,000, but even excluding that, it shows what would ordinarily be considered blockbuster growth of over a million jobs. The question is how much of a blockbuster each month’s report ought to be right now. We lost over 20 million jobs in April, and, together, the jobs reports since then have taken us about halfway back. I think there are good reasons to be concerned that fiscal support, which was robust in the spring due to CARES Act stimulus payments and enhanced unemployment, is no longer as strong as the economy needs and that there will be some continued softness in employment, as consumers are less prepared to spend than they should be. On the other hand, some of the softness is simply due to pandemic conditions — hotels are below two-thirds of their normal employment levels, but I’m not sure we should want a lot more travel right now. Even where pandemic conditions are better, like in much of Europe, that stuff is coming back slowly, in part because traveling less is an aspect of caution toward coronavirus. So while I’m worried that the rebound is going to go slower in the fall than it should, I think this report is broadly positive.
Ben: The coronavirus is still taking a grievous toll, killing around a thousand Americans each day the last couple weeks. But there is at least some positive news: Cases are well down from what they were a month or two ago (though they have plateaued at the high level of more than 40,000 a day), and deaths are slowly dropping. To what extent do you think this reasonably decent data is just a result of the country taming the virus slightly less poorly than it was before?
Josh: The jobs report reflects the employment situation as of the week of August 12, so it’s already a few weeks in the rear window. Daily case counts were lower in August than in July and continue to be lower now than they were in August, so I think that improvement in virus conditions likely was a tailwind, allowing continued reopening and renormalization in industries like restaurants and hotels. Just this week, gyms are reopening in New York City. So I think that’s a factor supporting job gains in this report, and one that will support gains in September. Remember, back in August when we got the July report, a lot of people were surprised that report showed continued job gains, as virus conditions were worse in July than June. This reflects improving virus conditions, and so should next month’s data.
Ben: There’s been an assumption among many that Democrats and Republicans would eventually get together and pass another stimulus bill, which would prevent states and cities from enormous budget shortfalls, transportation systems from teetering near collapse, and small businesses from another few months of misery, among other things. But talks between the two sides are basically nonexistent at this point, and Republicans will undoubtedly use the latest quasi-positive economic news to dig in their heels even harder on doing nothing. What if a bill just … doesn’t happen anytime soon? Or at all?
Josh: So, I had been a skeptic on the president’s stated intention to use executive orders as a substitute for that relief bill. But the $300 unemployment enhancement he funded by shifting disaster-relief money from FEMA is actually going out in many states and will ultimately be paid by most of them. The CDC’s sweeping order barring evictions of most households may not stand up in court, but it should, for a time, delay some of the economic dislocation that might have resulted from evictions. And the stimulus in the spring was, from a macroeconomic perspective, more than sufficient: Households took in more money than they could spend, or wanted to spend, because their consumption was actually down due to pandemic conditions at the same time they were receiving enhanced benefits. The average worker on unemployment benefits was earning significantly more than his or her previous wage. That all created a considerable financial cushion that has given a lot of households room to wait out congressional inaction. All of which is to say I am not sure that insufficient fiscal support is as big a threat to the economy over the next couple of months as a lot of people think. But the longer we go without a relief bill, the more that household cushion will go away, and the more certain businesses calling themselves “temporarily” closed will close permanently. There will also be tens of thousands of layoffs specifically in the airline industry, if their industry-specific rescue package is not extended past September 30. And after a few weeks, the FEMA money the president moved over (under dubious legal authority) to enhance unemployment benefits will run out. So there are significant risks here, but I think they have sometimes been overstated.