Troubling streak for the labor market

07/17/2020
Politico

Troubling streak for the labor market — Jobless claims have come in higher than a million — and more than double the worst week of the Great Recession — for 17 straight weeks. Last week, initial claims totaled 2.4 million, including the self-employed and gig workers, just a couple of weeks away from the expiration of federal unemployment insurance that adds $600 a week on top of state benefits. Evercore ISI dug into the data and found that allowing the expiration to happen would lead to a 2 percent smaller GDP by the end of the year than if the benefit were fully extended.

Ernie Tedeschi, Trekkie and policy economist at Evercore ISI: “Overall, emergency UI doesn’t appear to be a drag on job finding right now. Its positives are far outweighing its theoretical negatives, and that’s likely to continue in the near-term.”

The proof is in the retail sales — Retail sales rose 7.5 percent in June, according to the Commerce Department, nearly back to where they were before the pandemic. Experts point to this number as evidence that enhanced unemployment benefits have been saving the economy from a worse fate even as the country continues to shed jobs by the millions. An even clearer sign: JPMorgan Chase Institute found that, for people who received unemployment insurance in April, their spending dropped 25 percent before they got their benefits, but after they got the money, they spent 10 percent above pre-pandemic levels. Meanwhile, aggregate spending among employed Americans dropped 10 percent.

“Workers receiving unemployment insurance have a large increase in consumption due to UI, spending almost 73 cents of every $1 received, showing that the federal benefit supplement is well-targeted,” the institute said.

Trump’s new red line: payroll tax cut — Our John Bresnahan and Jake Sherman with the latest on coronavirus relief negotiations: “President Donald Trump has signaled to Hill Republicans that he will not sign a new coronavirus stimulus package without the inclusion of a payroll tax cut, according to three sources close to the issue. This new red line from the White House serves to illustrate the challenges that lay ahead in negotiating another Covid-19 relief package. GOP and Democratic congressional leaders are trillions of dollars apart in funding goals for the package, as well as how those funds will be spent.”