President-elect Joe Biden used the term to describe the US recovery. Here’s what it means.
New claims for unemployment assistance in the United States fell slightly last week but remain stubbornly high, a signal that the US’s economic recovery remains stalled as lawmakers and the White House continue to debate the next round of coronavirus relief aid.
But how does the US’s jobs situation now compare with the Great Recession of 2007-2008 and the height of COVID-19 lockdowns last March? And when will the US get back to its pre-pandemic employment rate? Here’s what you need to know.
Let’s start with this week’s numbers, please.
The number of people filing for state unemployment benefits fell by 19,000 in the week ending February 6, making for a seasonally adjusted total of 793,000, according to the US Department of Labor.
Is that good news?
Yes and no. Even with last week’s decrease, at 793,000 the number of people applying for unemployment assistance still remains significantly higher than where it peaked during the Great Recession, at 665,000 weekly claims.
The unemployment situation is better than it was at the start of the pandemic, however, when claims hit 6.867 million. But nearly a year after parts of the US entered their first coronavirus lockdowns, some jobs have simply not come back and businesses have closed permanently.
Do the weekly jobs numbers paint the full picture?
No. They only reflect new claims for help from people who are out of work, while the total number of people who are unemployed is much higher. At the start of the pandemic nearly a year ago, 22 million Americans were thrown out of work.
As of December, only about 12 million of those jobs had been recovered, which means 10 million jobs haven’t come back. And at 6.7 percent, the unemployment rate is nearly twice the level it was just before the coronavirus pandemic struck the US last year.
In a speech before the Economic Club of New York Wednesday, Federal Reserve Chair Jerome Powell said a broader measure of unemployment would put the rate closer to 10 percent, and figures show the US economy added only 49,000 jobs in January.
Who has been hit hardest?
Low-wage service sector workers, as well as African-American and Latino workers and women, have been disproportionately impacted by pandemic job losses, and US Treasury Secretary Janet Yellen warned that more aid is needed to prevent the COVID-19 crisis from becoming a “generational setback for racial equality”.
“During the early days of the pandemic, African Americans were the first to lose their small businesses. They were the first to lose their jobs,” Yellen said in a virtual meeting with members of Black Chambers of Commerce last week. “And we’ve seen early data that suggest Black workers will be the last rehired when the economy opens back up.”
So what will it take to get Americans back to work?
COVID-19 infections have started to decrease again, but the US’s sluggish vaccine roll-out and concerns about new COVID-19 variants continue to keep businesses in many states closed or under revenue-sapping restrictions.
The administration of US President Joe Biden is arguing that a big, bold stimulus package is the only way to respond to the crisis, and has proposed $1.9 trillion in aid, including tax credits, a federal top-up to state unemployment benefits and a $1,400 stimulus cheque for every American who qualifies.
Powell added urgency to that call on Wednesday, telling business leaders it “will require a society-wide commitment, with contributions from across government and the private sector” to get back to maximum employment.
Does everyone agree?
Nope, which isn’t surprising given the US’s deeply polarised political landscape.
Republican lawmakers say the country can’t foot the $1.9 trillion bill and have proposed a more modest $618bn in aid, with $1,000 cheques sent out to only those earning the lowest incomes.
Biden and Democrats have signalled they are willing to go it alone to pass the plan, however, by using Vice President Kamala Harris as the tie-breaking vote in the Senate.
So if Biden gets his way, what will spending big do for the economy as a whole?
University of Pennsylvania researchers using the non-partisan Penn Wharton Budget Model estimate Biden’s entire $1.9 trillion plan would increase the US gross domestic product (GDP – the value of all the goods and services produced by the economy) by 0.6 percent relative to the baseline this year.
But all that debt will eventually catch up to the US — and decrease GDP in 2022 by 0.2 percent and GDP in 2040 by 0.3 percent.
However, it will make a big difference for those families struggling the most. Penn Wharton researchers found that for those in the bottom 20 percent of the income distribution, stimulus cheques combined with the tax credit expansions “would boost after-tax incomes by over 50 percent”.
Bottom line — when will America get back to work?
The non-partisan Congressional Budget Office released its own analysis last week based on laws that had been passed by January 12, so it doesn’t take into account Biden’s stimulus plan.
CBO’s analysis didn’t see American employment returning to pre-pandemic levels until 2024.
Biden and his team have argued that doing too little now could cause long-term scars in the future, citing lessons they learned from the Great Recession.
For now, the debate over the next round of stimulus aid continues — as many out-of-work Americans are left waiting.