“the economic rebound has been so fast that many businesses, particularly in the hard-hit hospitality sector — which includes restaurants, bars and hotels — have been caught flat-footed and unable to fill all their job openings. Some unemployed people have also been reluctant to look for work because they fear catching the virus.
Others have entered new occupations rather than return to their old jobs. And many women, especially working mothers, have had to leave the workforce to care for children.
Most of the hiring so far represents a bounce-back after tens of millions of positions were lost when the pandemic flattened the economy 14 months ago. The economy remains more than 8 million jobs short of its pre-pandemic level.
The Biden administration’s $1.9 trillion rescue package, approved in early March, has helped maintain Americans’ incomes and purchasing power, much more so than in previous recessions. The economy expanded at a vigorous 6.4% annual rate in the first three months of the year. That pace could accelerate to as high as 13% in the April-June quarter, according to the Federal Reserve Bank of Atlanta.
One government report last week showed that wages and benefits rose at a solid pace in the first quarter, suggesting that some companies are having to pay more to attract and keep employees. In fact, the number of open jobs is now significantly above pre-pandemic levels, though the size of the labor force — the number of Americans either working or looking for work — is still smaller by about 4 million people.
In addition, the recovery remains sharply uneven: Most college-educated and white collar employees have been able to work from home over the past year. Many have not only built up savings but have also expanded their wealth as a result of rising home values and a record-setting stock market.
By contrast, job cuts have fallen heavily on low-wage workers, racial minorities and people without college educations. In addition, many women, especially working mothers, have had to leave the workforce to care for children.”
“Cowen argued 10 years ago that the previous set of general purpose technologies—machines and factories powered by fossil fuels and electricity—had run their courses, at least in the United States and other developed economies. When eventually nearly everyone had a car, electric appliances, and indoor plumbing, technological improvements were being made just at the margins. The result was a significant slowdown in the rates of productivity growth and incomes.
The online crew assembled by AEI expressed some optimism that a whole bunch of new technologies were on the verge of jumpstarting our sluggish economy. Strain declared himself very confident that the Great Stagnation is not permanent. He suggested that entrepreneurs were even now exploring how to adapt a whole suite of new technologies—batteries, vaccines, artificial intelligence, driverless trucks—to their best economic uses and whose benefits will become increasingly evident over the coming decade.
Tucker chimed in that it takes a while for entrepreneurs and innovators to figure out how to profitably apply ideas and new technologies. She noted that her fellow economists have been offering two excuses for why advances in digital technologies were not showing up in productivity figures. The first is that the enhancements were not being measured properly. The second is that the elaboration of general purpose technologies, e.g., steam and electricity in the 20th century, needs 20 to 30 years of experimentation before businesses can figure out how to really rev them up to boost productivity. She pointed out that people initially thought electricity was about the light bulb, but what really promoted economic growth was powering machinery in factories and electric appliances at home.
Cowen cautioned that many technological advances would doubtlessly improve human welfare but still might not show up in U.S. gross domestic product (GDP) and productivity statistics.”
“April, who works at a pet shop in Minneapolis, makes $11.75 an hour. She loves her job, and it pays better than the federal minimum wage, but not by much. She and her partner get by. They still don’t make enough money to afford a car, but they can manage rent, their phones, and internet, and support their 12-year-old daughter.
Her partner lost his job as a body piercer when the pandemic hit. He went on unemployment insurance for a while, and he and April finally found health insurance through a public assistance program. It was more consistent income than they’d seen in quite some time. “We were able to get a little bit of extra money into our accounts for once. We weren’t going paycheck to paycheck for a while. That was wonderful,” April said. “I think a ton of people were finally out of the poverty level with that money.” Her partner has now found a different job that allows him to work from home.
Life is more or less fine, but April said it would be better if they made more. “We would be able to have a house like a normal family,” she added.
April and her family’s situation is quite normal: In 2019, about 39 million people made less than $15 an hour. When the pandemic hit, that number actually fell — not because people were making more but because low-wage workers became unemployed.”
“China had become the second-largest export market for American-made cars by 2017, the last full year before Trump’s trade war began. After a series of tit-for-tat tariff increases between the U.S. and China, however, American automotive exports to China fell by more than one-third. Higher tariffs on imported car parts from China raised costs for automakers in America, while China’s retaliatory tariffs on American-made cars hiked prices and reduced demand in China.
To avoid those costs and to evade increased uncertainty, some carmakers began shifting their supply chains—but not in the direction the White House was hoping.
BMW, for example, shifted much of the production of its X3 sport-utility vehicle from Spartanburg, South Carolina, to China after reporting that tariffs had cut the company’s American profits by about $338 million in 2018. The higher costs imposed by the trade war caused Tesla to announce that it was “accelerating construction” of a new plant in Shanghai.
Overall, the number of American automating jobs peaked in September 2018, shortly after Trump’s trade war began, and then declined during 2019 and 2020.
The signing of the “phase one” trade deal with China did little to stop or reverse those shifts. Even though China pledged to increase its purchases of American-made vehicles and car parts as part of the agreement, exports are still lagging well behind their pre-trade war totals, according to the PIIE report.”
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“Trump believed that hiking tariffs would reduce America’s imports from China, allowing the gap between the value of those imports and the value of America’s exports to fall. What he failed to grasp, however, is that many of those imports—especially when it comes to manufactured goods—are materials necessary for making the items that American companies end up exporting back to China: like cars.
Higher costs imposed on imports ended up slowing American exports—and thus the trade deficit actually grew. Meanwhile, companies could avoid the cost of Trump’s tariffs by shifting production out of the United States, and some chose to do that.
Biden, so far, seems unwilling to remove Trump’s tariffs. By announcing a misguided “Buy American” policy for government procurement, Biden is also expanding on some of the Trump administration’s protectionist manufacturing policies.
If the past few years are any indication, all Biden will likely accomplish by this is to further erode America’s industrial base by trading away automaking jobs in exchange for the appearance of “toughness.””
“discouraged workers aren’t the only problem with the unemployment rate. In fact, these days the headline unemployment rate isn’t just an undercount, it actually paints an alternate reality that masks the degree to which low- and moderate-income people are hurting. As a result, policymakers believe these Americans are better off than they actually are.
There are two additional problems with the way we count people who are unemployed.
First, there’s no accounting for how many hours a part-time worker is working. By the BLS’ traditional definition, a handyman or private nurse who works for a single afternoon each week is counted in the headline national unemployment figure as “employed,” even if they want more work but can’t find it. Our unemployment figures make it look like the person working a handful of hours because that’s the only work they can get is just as “employed” as a full-time CEO. In practice, this means that the unemployment rate actively obscures how many workers are living in poverty in part not because they don’t have a job, but because they can’t get enough hours.
Second, the data doesn’t indicate whether the job a worker is doing pays enough to keep them out of poverty. The assumption implicit in the data is that if you’re “employed,” all should be well, but as the growing movement toward raising the minimum wage attests, it’s increasingly clear that many American workers are employed, often full-time, but still living in poverty.”
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“even when the economy was purportedly at its peak before the pandemic, approximately a quarter of Americans looking for full-time work at a livable wage couldn’t find it. And then at the nation’s worst moment in nearly a century, that number jumped, showing that 32.4 percent of the workforce was out of luck.”
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“The bottom line for too many Americans and for minorities in particular, is that for a long, long time, the American economy has not been performing as well as the headline unemployment rate suggests. And while that may be news to those living in comfortable neighborhoods and suburbs, it will not surprise those living in more downtrodden corners of many cities, let alone those who are living in places like the largely forgotten city where I grew up, York, Pa. Over the last several decades, as businesses including York Dental or York Air Conditioner have either closed facilities or scaled back, middle-class prosperity has become more of an impossible dream than an American Dream.
Washington, D.C., has failed to respond appropriately because the headline unemployment figures, particularly in good times, have given some policymakers of both parties license to embrace a narrative that in the absence of a crisis like the one we’re enduring today, our economic approach works fairly well.
We need an economic agenda born from the realization that the true unemployment picture is much worse than policymakers realize. A quarter of the workforce, including a disproportionate share of minority communities, can’t land a full-time job with a living wage even when the overall economy appears to be healthy. The window through which we view the economy matters. We’ve been using a broken measuring stick to keep track of our success.”
“Respondents were allowed to select more than one answer to the question, and most said the money would go to filling an essential need. The survey found about 60 percent of people planning to use at least some of their money on food, and about 45 percent planning to spend some or all the funds on housing — either rent or mortgages. Other bills were also a priority, with 45 percent saying the stimulus would help with utility payments, and about 31 percent wanting to put money toward credit cards or loans.
About 15 percent of respondents felt they might be able to save some or all of the money. Only 2.5 percent said some portion of the money would go toward recreational expenses.”
“Early on in his administration, Trump raised tariffs. The Cato Institute’s Scott Lincicome describes the president’s trade war as having “implemented five different tariff actions on almost $400 billion in annual U.S. imports (as of 2018) under three different laws with different rationales: ‘safeguards,’ ‘national security,’ and ‘unfair trade.'” We were promised ever-more jobs thanks to the tariffs. But as numerous academic studies have shown, the people who shouldered nearly all of the burden of these import taxes were not foreigners but, rather, Americans.
Protectionism reduces the overall wealth of the nation. Aside from a few favored and protected producers, Americans, in general, are made poorer. Consumers have to spend a higher share of their incomes to buy goods that they could otherwise get for less. As a result, ordinary Americans save less and have less to spend—even on nontariffed goods and services. The American producers of goods that use tariffed foreign inputs also see their production costs driven up, which drives their ability to compete down.
Unsurprisingly, the administration’s belligerent trade policies disturbed our trading partners. They retaliated with their own tariffs on American exports (to the detriment of their consumers). Adding insult to injury, the president’s erratic behavior, threats, and contradictory tweets about his trade policy likely spooked investors. The overall uncertainty and negative effects of the trade disputes surely dampened the beneficial effects of the president’s few good fiscal policies and regulatory reforms.
Take, for instance, the corporate income tax reduction as part of the Tax Cuts and Jobs Act of 2017. This reform should attract to the United States much foreign direct investment, or FDI. Yet, FDI flows into the United States were 10 percent lower in 2019 than during the two previous years. Simeon Djankov and Eva Zhang of the Peterson Institute for International Economics recently looked into the fall of FDI flows into the United States. “It is likely that the positive effect of the corporate tax cut in attracting FDI to the US,” they concluded, “was outweighed by trade disputes and threats of withdrawal, as well as actual withdrawals, from international treaties and organisations, which may have scared investors away.”
As for trade treaties, the Trump experiment is one that I hope we won’t repeat. First, he impulsively withdrew the United States from the Trans-Pacific Partnership, a multilateral trade agreement designed to oblige China to behave better on trade while opening up a large free-market zone with other Asian nations.
Trump renegotiated the North American Free Trade Agreement with overall negative net impacts, thanks to an anti-growth minimum wage and increased domestic content requirements. And he moved to extend high tariffs on Korean trucks as part of the one-sided reform of the George W. Bush-era U.S.-Korea Free Trade Agreement, to the detriment of U.S. consumers.
Finally, the president inflicted serious damage to the World Trade Organization—the great arbitrator of all international trade disputes—on the specious claim that the organization wasn’t sufficiently deferential to the United States. Here’s how Lincicome sums it up: The administration chose “to shut down the organization’s appellate body (basically the supreme court of trade dispute settlement) instead of negotiating new and necessary reforms in good faith (e.g., by teaming up with like-minded countries while offering actual concessions on longtime irritants like U.S. agricultural subsidies and ‘trade remedy’ rules).””
“A growing chorus of lawmakers and experts argue Congress could further improve jobless benefits by adding something called “automatic stabilizers” into the equation. That would mean that benefits would be tied to certain economic conditions — say, the unemployment rate — and would phase out as the economy gets better. They would be triggered on and off according to what’s actually happening in the economy for businesses and for workers.
“A ton of resources are wasted during a really crucial time … just having to go through this ad hoc stimulus and relief and recovery, and it just doesn’t have to be like that,” said Heidi Shierholz, a senior economist and director of policy at the Economic Policy Institute and former chief economist at the Labor Department. “We can automate things to make it so Congress could step in if they ever needed to do more relief, but it would mean that the basic structure of relief and recovery would be there already.””
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“The government already has in place automatic stabilizers, including unemployment itself, which is intended to stabilize the economy — not only do they replace income for people who lose jobs, but they’re also meant to help prop up the economy in moments of downturn and keep consumer spending going. When an unemployed worker can’t pay their rent, it’s bad for both the tenant and the landlord.
Because the unemployment system has become so whittled down over the years, benefits are less effective at supporting the economy than they used to be — food stamps tend to be more impactful — but it varies by state. “Unemployment insurance is a much better stabilizer in Massachusetts and New Jersey than it is in Texas and Virginia,” said Wayne Vroman, a labor economist at the Urban Institute.
But with federal interventions during the pandemic, that has changed somewhat, at least temporarily. Expanded unemployment benefits appear to have been quite useful in helping people spend what they need, which in turn helps businesses dependent on those customers. Research shows they actually helped many people with savings, and they likely made the recession less severe. They also reduced some inequalities in how Black and white workers access benefits and the amount of benefits they receive. This makes the argument that they should continue as long as the crisis continues make sense.”