(This photo of Paul Krugman is from UPI.com.)The Labor Department released it unemployment statistics for May last Friday, and it was better than most economists had expected. But it was still at least a 13.3% unemployment rate.
Although Donald Trump is trying to paint it as being great -- indicative of an economy that is strongly rebounding, that is not good. And it may actually make the economy worse, because it gives Trump and congressional Republicans an excuse to not do anything more to help hurting Americans. That would be a huge mistake, since much more help needs to be offered by the federal government.
Here is how Nobel Prize-winning economist Paul Krugman puts it in his New York Times column:
On Friday the Bureau of Labor Statistics released its report on the employment situation in May. The report was much better than most economists expected, showing a large gain in jobs and a fall in the unemployment rate.
The thing is, a good jobs report may be bad for future policy. Why? Because the U.S. economy is still very much on life support. And a bit of good news is all too likely to encourage the usual suspects to end that life support too soon, with dire effects just a few months from now. . . .
The saving graces of the situation, such as they are, are that (a) while there is immense economic hardship, it’s not nearly as severe as you might have expected given Depression-level unemployment and (b) the employment slump has so far been mostly limited to contact-intensive sectors. That is, the crisis hasn’t — yet — spilled over into a crash of the economy as a whole.
Both these saving graces, however, are the result of emergency aid — the safety net hurriedly put in place in late March, largely at Democrats’ insistence. This safety net alleviated hardship while allowing the unemployed to maintain spending and encouraging businesses to maintain their payrolls.
And unless Congress and the White House act, that safety net will be yanked away by August.
More specifically, enhanced unemployment benefits, which are both more generous than standard benefits and cover more people, have been a huge source of support despite the difficulties many have faced in getting enrolled. Among other things, those benefits have — temporarily — made it possible for millions of families to keep paying rent on their homes. But those benefits will expire July 31.
And the Paycheck Protection Program, which offers small businesses loans that can be converted into grants if they’re used to maintain payroll, is already out of money, and the job support lasts only eight weeks.
So two of the main things sustaining the economy are set to disappear. At the same time, Congress has yet to provide major relief to state and local governments, which are facing a huge fiscal crisis and have already laid off a million and a half workers; there will soon be many more layoffs unless aid comes soon.
In other words, we’re facing probable disaster in the near future unless Congress acts. But here’s the thing: Republicans just hate helping the unemployed, hate aiding states, in fact hate any kind of disaster response other than tax cuts. And the uptick in jobs gives them an excuse to indulge their hatred.
House Democrats have passed the HEROES Act, a very good bill extending and improving economic relief. But Friday’s employment report encourages Republicans to revert to type; they’ll almost surely block any significant further relief until or unless the economic situation becomes even more dire than it is.
It also encourages them to push for more opening, more relaxation of social distancing, despite the fact that Covid-19 is nowhere near under control and there are early indications that the pandemic may be roaring back to life as states reopen.
So it’s all too possible that we’ll see an ugly scene in the late summer and early fall — more government layoffs and widespread job losses in industries that have so far been relatively unscathed as desperate workers slash spending, all against the backdrop of a resurgence in hospitalizations and deaths. And the May uptick in jobs makes that scene more likely, because it promotes more wishful thinking from the people who insisted a few months ago that Covid-19 would go away and posed no threat to the economy.
