EuroWire September 2020

Transatlantic cable

The PPP, part of a historic fiscal package worth nearly $3 trillion, offers business loans that can be waived, in part, if used to pay employees. The Labor Department’s Bureau of Labor Statistics (BLS), which compiles the employment report, announced that a misclassification by respondents had shown the unemployment rate to be lower in April than it actually was: a number of people claimed to be “employed on temporary layoff” when they should have classed themselves as “unemployed on temporary layoff.” Without the misclassification, the April rate would have been closer to 19 per cent. Some economists thought that correcting this error would account for estimates of up to 27 per cent for May unemployment in the Reuters survey. In April, at least 18.1 million of the 23.1 million people unemployed said they were on temporary layoff, expecting to be back at work within six months. About 2.6 million believed the job loss was permanent. Economists said that workers’ perception that their layoffs were temporary is one reason the US stock market rebounded sharply from the pandemic lows. “What makes this downturn different from all others is that people have held the belief that, once everything reopens, all the jobs are going to come back,” said Steven Blitz, chief US economist at TS Lombard in New York. “If we see temporary layoffs go down, as more see those job losses [as] permanent, that means their confidence in the economy, six months from now, is going to be a lot less and that’s going to reduce spending plans.”

unenviable post-World War Two record. The Labor Department’s monthly employment report appeared to support economists’ predictions that it will take several years to recover from the economic “meltdown”. Still, it was anticipated that May would mark the nadir for the labour market. While layoffs remained very high, they eased considerably in the second half of May when businesses, closed since mid-March, began to reopen. Consumer confidence, manufacturing and services industries were also stabilising, though at low levels – hopeful signs that the worst was over. “The good news is that we probably have hit the bottom,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “But the recovery will be painfully slow. It will take years, probably a decade, to get back to where we were at the end of last year.” In a Reuters poll of expectations for the economy, a survey of households was expected to show unemployment jumping to 19.8 per cent in May, from 14.7 per cent in April – the highest since 1948 (when government records began). Non-farm payrolls were expected to have dropped by eight million jobs after a record plunge of over 20 million in April. That would bring total job losses to 29.4 million since the shutdown began in March: more than three times the number of jobs lost during the 2007-09 recession that took six years to recoup. Economists remain divided on whether the government’s Paycheck Protection Program (PPP) is really helping.

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September 2020