The ongoing COVID-19 crisis continues to devastate the significant economic gains of the past decade, and recent evidence suggests we are far from done with the ongoing economic crisis.
This past week, it was announced that 1.1 million workers have filed new unemployment claims, thus continuing the worst jobs crisis since the great recession. The numbers were higher than expected by economists and analysts employed by the government.Read More »
The job loss has been massive, greater than any other such event in the history of the United States. 57.3 million have filed for unemployment since the crisis began, as mass layoffs occurred jobs loss unlike anything ever seen before. The amount of the loss varies from state to state, and there is some good news, as many of those people have since returned to work.
Continuing claims – which represent the number of people who are going back to work – continue to drop. Last week, 15.5 million Americans filed such a claim. This week, that number dropped to 14.8. This number is extremely important, as it shows how many Americans are going back to work and gives rise to the hope that the economic recovery from the pandemic will truly be “v-shaped,” meaning that people will get back to work as quickly as possible.
However, the larger than expected jobs loss signals potential trouble for economic recovery, as it shows that business continue to close and jobs are still being shed.
Furthermore, it is worth noting that job losses are not even across the country. Instead, they are higher in some areas than others. This is particularly the case in the southern and western portions of the United States, which continue to have issues containing and controlling the pandemic. As a result of these challenges, job losses remain higher in these regions of the United States than in other sections.
This reality implies the obvious: If the virus makes a resurgence, as many expect it to, we may be looking at additional economic pain in the fall.
Proposed Presidential Response
In response to the ongoing crisis, President Trump has taken some unilateral action. The House of Representatives passed an additional comprehensive stimulus measure totaling 3 trillion dollars that would have extended unemployment benefits, but the Senate did not pass it. Instead, President Trump announced that he was transferring money from FEMA to unemployment benefits, allowing states to extend additional benefits on top of standard unemployment benefits.
However, there are multiple issues with these benefits. First, they total $400, not the $600 federal weekly supplement that was first created as part of the CARES act. Second, states have to pay for 1/4 of these benefits – a significant expense. Third, states have to set up new infrastructure to make these payments – an expensive and time-consuming proposition. Furthermore, these benefits won’t last long – Pennsylvania, for example, has said that the benefits likely won’t last for more than five weeks.
Last, and perhaps most importantly, are legal questions. There are conflicting legal interpretations as to whether or not the President has the authority to make such unilateral economic decisions. It is highly probable that a legal challenge may put a stop to such an effort.
The President has said that he wants to make a payroll tax cut permanent. There are two issues here, however. First, that does nothing to help people who are currently receiving unemployment. Second, the payroll tax is the primary method by which social security is funded. Ending the payroll tax could devastate the social security fund, and this would unleash a whole new array of political and financial challenges to the United States.
Continuing Economic Pain
It is worth noting that, for millions of Americans, their economic pain is bad and getting worse. Federal moratoriums on evictions and foreclosures have ended, and state protections have varied. As a result, tens of millions of Americans are looking at potentially being evicted from their primary residence. Furthermore, many states have enacted prohibitions against electrical or other utility shut-offs, but those prohibitions may expire in the near future as well. Barring additional legal protections or a massive economic rebound, these people are facing major economic problems.
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