As jobless help ends a virus threatens to hit the work market
The increase in coronavirus cases is impacting on the economy, slowing job creation in critical places and weakening consumer confidence at a time when millions of Americans are due to lose their unemployment benefits. As a result, everything from consumer spending to employment in industries that rely on in-person interactions, such as entertainment and hospitality, has slowed.
As jobless help ends a virus threatens to hit the work market
Now, when the government issues the August jobs report on Friday, the Biden administration may be confronted with additional proof that the Ebola outbreak is having an impact. Economists estimate that between 500,000 and 600,000 new jobs were created, which is somewhat less than half of what was added in June and July. President Joe Biden, who has faced setbacks in his handling of both Afghanistan and the coronavirus in recent weeks, has bet his administration’s success on restoring the economy to pre-pandemic strength. A bleak job outlook could further tarnish his public image. An NBC News poll released last week found that less than half of voters, or 47%, approve of his handling of the economy, a 5-point decline since the spring. Biden is set to speak following the jobs report on Friday. “Delta signals a rocky path ahead until the public decides it needs to put the public health crisis behind them — and that means vaccinations,” said Joseph Brusuelas, chief economist at middle-market consulting firm RSM. “It’s now in the public’s hands, not policymakers’.” Major analysts have lowered their economic forecasts for the third quarter due to an increase in coronavirus cases, though many believe the economy will recover after that.
For the July-September period, Goldman Sachs lowered its growth prediction from 9% to 5.5 percent, citing the Delta variant’s effects as “proving to be considerably higher than we thought.” There’s a growing body of evidence highlighting the impact of the resurgent coronavirus, with some indicating a labor market softening: According to Homebase, a scheduling software provider, the number of workers working declined by 4% and the number of enterprises open fell by 2.5 percent from July to August. The drop-off was most pronounced in the entertainment business, which had a 35 percent loss in employment over the month, and in the hospitality industry, which saw a 20 percent drop. And, according to ADP, the payroll processor, private-sector job growth was only 374,000 last month, much below economists’ estimates. In July, consumer spending slowed as well, with fewer individuals visiting eateries. In late August, hotel occupancy rates were down by more than 9% compared to the same week in 2020. According to the University of Michigan’s Consumer Sentiment Index, consumer sentiment declined more than 13% in August, reflecting “the least favorable economic forecasts in more than a decade.” That’s partially an emotional response, according to Richard Curtin, the survey’s senior economist, reflecting “dashed hopes that the pandemic would soon stop and lives might return to normal.”
The White House and its allies are downplaying concerns about the Delta variant’s economic impact
focusing instead on getting infrastructure bills passed through Congress and claiming that the coronavirus, not the underlying economy, is the problem. The administration “always anticipated that recovering from a once-in-a-century epidemic would be a tremendous undertaking,” according to one White House official. And while the Friday jobs data will give the clearest indication of whether Delta is having a large impact on the economy, the fallout will be temporary, according to Jason Furman, a prominent economic adviser to President Barack Obama who is close to the Biden White House. Furman explained, “It moves us from very, very quick to extremely fast.” “No one is talking about it causing job losses. It’s just a matter of whether it slows the rate of job growth.” Other signs, to be sure, point to ongoing expansion in several areas. According to ZipRecruiter, an online job-search site, demand for workers remains robust, with active online job ads up 13% throughout the country from July to August. Vaccination rates are also increasing, and coronavirus incidence appear to be leveling off — two areas of success that, if they continue, will have a significant economic impact. Nonetheless, the spike in coronavirus cases and the economic downturn may make things worse for unemployed people just as expanded federal unemployment benefits are scheduled to expire across the country.
According to Andrew Stettner, a senior fellow at the Century Foundation, when the programs Congress established during the height of the pandemic expire on Sept. 6, an estimated 7.5 million workers will lose access to additional aid. He explained, “This is a five-alarm fire that we’re treating as if nothing’s wrong.” “As the Delta variant rises, it is an act of governmental neglect to allow a record number of employees to be fully cut off from unemployment benefits, threatening our economic progress.” The Supreme Court’s decision to overturn the federal eviction ban, which could result in at least 750,000 renter households losing their homes this year, is further clouding the economic picture. Under the March 2020 CARES Act, Congress established three federal unemployment insurance programs in response to the onslaught of pandemic layoffs. The three schemes have given jobless people an extra $300 per week, expanded benefits to those who were not previously eligible, such as gig workers, and extended the term of state unemployment insurance. Throughout the pandemic, lawmakers have extended these programs multiple times. However, the White House and Capitol Hill have little appetite to continue the programs at a later date, despite complaints from low-wage businesses about a labor shortage and 26 states opting to stop their participation in the programs early. While conservative politicians have claimed that the programs are too generous and are preventing individuals from returning to work, research suggests that removing them could have the opposite effect: driving more workers out of the labor market and drastically reducing economic spending. According to research by Arindrajit Dube, an economics professor at UMass Amherst, only one out of every eight employees who lost jobless benefits when their states discontinued the programs early had found work by August. He believes that turning off the programs fully around Labor Day will save $8 billion in spending in September and October. “That could create some headwind for the recovery,” Dube said. “The hope was that this would hasten the job recovery, but I believe it is overly optimistic.” The danger for the job market heading into the fall is not so much that the Delta variation would lower hiring demand, but rather that labor supply will remain short if the increase in instances causes people to stay on the sidelines. Despite the increased immunizations, the number of persons out of work due to concerns about contracting or transmitting the coronavirus increased from 2.5 million to 3.2 million between late July and mid-August, according to Census Bureau data.