Trump Touts ‘Rocket Ship’ Recovery. Does That Mean Next Stimulus Is Dead?
Friday’s jobs report was a complete stunner. The economy added 2.5 million jobs in May, the Labor Department announced, smashing expectations of millions more job losses, and the unemployment rate fell to 13.3%, down from 14.7% in April.
President Trump hailed the numbers, touting them as an indication of a strong economic rebound from the coronavirus pandemic, a salve that would heal the racial tensions on display across the country over the last week and “affirmation of all the work we’ve been doing, really for three and a half years.”
“Today is probably, if you think of it, the greatest comeback in American history,” Trump said at a hastily arranged news conference in the White House Rose Garden.
Trump celebrates ‘a very big day for our country’: “This is better than a V,” Trump said about widespread prognostications about whether the economic recovery would be shaped like a V, a U, a W or even a Nike swoosh. “This is a rocket ship. This is far better than a V.”
The president spoke for nearly an hour, and his rambling remarks covered a lot of territory — a whole lot — but were mostly a victory lap centered around the jobs numbers and how they could fix what seems broken in the country, including the protests sparked by the killing of George Floyd in Minneapolis police custody. “Hopefully George is looking down right now and saying, ‘This is a great thing that’s happening for our country.’ This is a great day for him. It’s a great day for everybody,” Trump said.
What does this mean for the next coronavirus relief bill? Trump said Friday that he’ll still pursue additional stimulus money, “despite the numbers and how good they are.” He also said he would push for a payroll tax cut, a proposal that many lawmakers and economists have greeted with skepticism, saying it’s unlikely to deliver help to those who need it most. Trump said that a payroll tax cut would be a “tremendous incentive” for businesses and workers. And he said he’d seek targeted aid for restaurants and parts of the entertainment industry.
Still, the stronger-than-expected jobs numbers will almost certainly diminish the chances for another large coronavirus relief bill. "This definitively kills any chance of trillions of new spending," one Senate Republican aide said, according to The Washington Post’s Jeff Stein, who also reported that White House economic advisers Art Laffer and Stephen Moore said that the jobs report shows Congress can hold off on new stimulus spending. “The sense of urgent crisis is very greatly dissipated by the report,” Moore told the Post.
Even before Friday’s jobs report, Post reported that the president was reluctant to pursue a new stimulus package, citing White House officials and Trump advisers. Conservatives have reportedly urged Trump to hold off on providing more money to states hit by the pandemic and focus instead on tax breaks for businesses as well as cutting regulations and the trade war with China, and the president is in no mood to work with Democrats who have criticized him for his responses to the pandemic and mass protests.
Trump’s opposition to additional stimulus “is privately seen as soft and pliable,” the Post’s Robert Costa and Ashley Parker write, and it could depend largely on the outlook for his reelection campaign against presumptive Democratic nominee Joe Biden.
“He could go from saying ‘I’ll do nothing more’ to saying ‘I’ll do $1 trillion more’ in a second if he thinks it helps him with beating Biden,” an unnamed Trump adviser told the Post.
Economists worry about a ‘nightmare scenario’: Some economists warn that celebrating one jobs report as evidence of an economic rebound could be premature — and could ultimately undermine a recovery if it reduces further stimulus efforts. “This is how one good jobs report can turn into a nightmare scenario,” Ernie Tedeschi, a Treasury economist during the Obama administration now at Evercore ISI, tweeted.
Months of extraordinarily strong job gains will be needed to get near the low unemployment levels the U.S. saw at the beginning of the year. Michael R. Strain, director of economic policy studies at the conservative American Enterprise Institute, tweeted that the 13.3% unemployment rate is “an economic and human disaster,” and that another coronavirus bill remains necessary. “Workers, families, and small businesses need Phase 4,” he said. “There’s no doubt about the need.”
Economists also point out that the unemployment numbers may reflect the massive fiscal support Congress has provided so far, particularly the Paycheck Protection Program of forgivable loans to small businesses, which likely helped fuel strong gain in the restaurant and retail sectors. “Many economists expected the PPP would be a big factor in June, but it turns out the impact was sizable in May,” the Post’s Heather Long explains. “Most economists look at these numbers and urge Congress and the White House to keep the PPP and other aid going. Most of the government relief money is slated to dry up by the end of July.”
What the Shockingly Strong Jobs Report Really Means
Forecasters had expected the report to show millions of job losses and an unemployment rate near 20%. Instead, it delivered the best one-month jobs number since at least 1939, while providing strong support for the view that the worst of the coronavirus recession is now behind us.
Here’s a roundup of details and comments on the jobs report few if any experts saw coming:
The economy is reopening: “These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it,” the report said. “In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.”
What rebounded, what’s still shrinking: The leisure and hospitality sector led the pack with a gain of 1.2 million jobs in May, after losing 7.5 million jobs in April. Health care also made a big comeback with 321,000 jobs (led by dentists, who gained 244,000 jobs). But other sectors are still contracting. Government payrolls, which include public school teachers, shrank by 585,000 in May as state and local governments continued to struggle with plunging tax revenues and increased social spending. And job losses continued in the air transport, transportation and warehousing, mining and logging, and information sectors.
The economy still has a long way to go: The May jobs picture may have been much stronger than expected, but it’s still not good. The 13.3% unemployment rate is still far higher than the 10.1% peak during the Great Recession, and 21 million people are still unemployed. Employment is roughly 13% below its level in February, before the pandemic struck. And the numbers may still be understating the problem. Millions of workers on furlough were not included in the unemployment numbers; had they been counted, the unemployment rate would have been over 16%. Adding in workers who have given up and left the labor force, and the unemployment rate could be closer to 20%.
And the jobs gains were not evenly distributed in the population. While unemployment rate for whites fell to 12.4%, down from 14.2% in April, the jobless rate for black workers rose slightly to 16.8%. The Asian unemployment rate also rose, from 14.5% to 15%.
More bumps ahead? “While the labor market recovery started a month or two earlier than expected, therefore suggesting a V-shaped trajectory in the early stages of the recovery, it doesn't tell us about the ultimate shape of the recovery,” researchers at Bank of America said in a note. “We continue to remain concerned about the health of the economy after the initial jump higher from reopening. The path ahead is still likely to be bumpy given risks posed from the virus and many millions of displaced workers.”
Chris Rupkey, chief economist at Mitsubishi Financial Group, had a particularly pessimistic take on the road ahead, saying that “all the workers who lost their paychecks will find it difficult to regain their place in society as many of these jobs are gone forever. It took years for the economy to grow enough to find jobs for those unemployed in the last recession, and it will take years again this time to do the same.”
“It would seem to be that if anybody has an incentive to get another big stimulus package through Congress soon, it’s Donald Trump, who’s facing voters in November. I can’t tell if this is just a negotiating tactic on his part or if he’s listening to some of the hard liners in the White House. It’s really baffling.”
– David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, in The Washington Post piece reporting Trump’s reticence for a big new stimulus package.
Pain for Public Payrolls: The May jobs report shows that state and local governments have been cutting back aggressively, with more jobs lost in the past two months than in all of the Great Recession. Most of the cuts were in schools, which lost 373,200 jobs last month. Some economists worry that essential service providers such as firefighters may be next. “Such job cuts, if maintained, could exert a drag on the recovery,” Bloomberg’s Danielle Moran said Friday. Josh Bivens, director of research at the Economic Policy Institute, said that “[i]t’s going to be a very incomplete recovery, even at the end of 2021, if we don’t deal with the state and local sector.”
Are Jobless Benefits Really Too Generous? Some lawmakers have expressed concerns that the $600 per week enhanced unemployment benefits provided by the CARES Act are too generous and may be delaying the recovery by allowing workers to stay home rather than returning to their jobs. But an analysis published this week by Morning Consult economist John Leer finds that about half of workers receiving benefits are earning less than they were before.
“While there is evidence that some workers are earning more from UI [unemployment insurance] benefits than they were from their pre-pandemic jobs (30 percent), a far greater share of UI recipients brings in less than what they made prior to the pandemic (49 percent),” Leer writes. “While some workers may be better off receiving UI benefits than they were while working, the totality of evidence argues that unemployed and underemployed workers receive on balance less money than they did prior to the coronavirus pandemic.”
- Economists Predicted 20 Percent Unemployment in May. How Did They Get It So Wrong? – Heather Long, Washington Post
- The Jobs Market Is Recovering, But We Might Blow It – Conor Sen, Bloomberg
- The Economic Pain That the Unemployment Rate Leaves Out – Alicia Parlapiano, New York Times
- What to Make of the Rebound in the U.S. Jobs Report – Ben Casselman, New York Times
- There Are Two Recessions, Not One – Justin Fox, Bloomberg
- The Good News, the Bad News and the Scariest Jobs Chart You’ll See – Catherine Rampell, Washington Post
- Trump Spins Good Jobs Report to Create Fake Impression That All Is Well – Paul Waldman
- How the U.S. Economic Response Could Change as People Go Back to Work – Megan Cassella and Rebecca Rainey, Politico
- Protesters’ 'Defund the Police' Rallying Cry Is Achieving Some Progress – Jacqueline Alemany, Washington Post
- How to Do Reparations Right – David Brooks, New York Times
- Suddenly, Public Health Officials Say Social Justice Matters More Than Social Distance – Dan Diamond, Politico
- Investing in the Transportation System America Needs – Ryan Chao, The Hill
- The Only Way to Save Higher Education Is to Make It Free – Claire Bond Potter, New York Times