The auto industry is gearing up to bring back at least half its workers and to begin producing cars again. Across the country, states and localities are attempting to restart businesses that have been shuttered for as much as two months because of the Coronavirus pandemic.
One might think that the worst is over, both with the disease that has killed over 93,500 people and infected over 1.5 million in the US and 4.9 million globally, and that has brought the US economy to a virtual standstill, but that would be a huge mistake.
The pandemic, most experts agree, is still raging, and is actually increasing its rate of infection in the US at this point to some 20,000 new cases a day. These experts warn that it may surge again in the fall, even in jurisdictions like California, New York, New Jersey and Massachusetts, where strict efforts at containment appeared to have worked in slowing its spread.
Meanwhile, the economy has tanked in ways not seen since the Great Depression. Economic activity in the first quarter of this year dropped by 4.8 percent, and that’s despite the fact that the first two months of the quarter predated the real arrival of the pandemic, so all of the decline happened in the third month. In the second quarter, particularly after a disastrous collapse in April, the economy is likely to see GDP plunge by 13 percent, which would be a staggering annualized 43 percent rate. That’s a catastrophic economic collapse vastly greater than at any other period in US history. Despite brave talk from the Trump administration about the economy “roaring back”’ by year’s end, many economists think a recovery — meaning a return to pre-Pandemic levels of employment and business activity, could be years away, even if the pandemic threat ends entirely.
What we Americans need isn’t cheery talk and rosy predictions but a dose of truth, and we’re not getting it from Washington.
Unemployment is worse than we’re being told
Take unemployment. On May 8 when the Bureau of Labor Statistics (BLS) released its latest monthly report of the unemployment situation in April (actually, because of the period that the employment survey is conducted always ends in mid-month, the unemployment situation as of April 18) it was said to be 14.7 percent of the labor force. That number, however, was way too low, even by the BLS’s own admission. In a note appended to the bureau’s press release (which was largely ignored by the major media in their headlines), the BLS explained that its surveyors—working on the phone rather than going door-to-door as normally is done — had improperly classified those people who said they had been temporarily laid off because of the pandemic but expected to be rehired as “employed” instead of ‘unemployed.” The BLS said it was not correcting the mistake because of a long tradition of not tinkering with the data once it had been collected — error or not.
However, the bureau acknowledged that correcting for that error would have raised the actual reported unemployment figure to 19.5 percent, a number higher than any time since the end of the Great Depression in 1940.
But that’s only part of the story.
Actually, what the BLS and the entire US media, as well as the political establishment in Washington, refer to as the “official” unemployment rate, has only been the official unemployment rate since 1994. That year, which not coincidentally was the year that the jobs-destroying North American Free Trade Agreement (NAFTA) was negotiated and passed into law, changed the way the BLS’s so-called U-3 unemployment rate was counted, removing from the total anyone who had been unemployed for more than a year. These unfortunate people, even if they were still actively looking for a job, were redefined as being “out of the labor force.” This change, which had no scientific or sociological basis, was a pure political move by the Clinton Administration designed to make the unemployment numbers look better going forward, and of course, to hide the job losses caused by NAFTA. It has been retained by all subsequent presidential administrations, including the latest one.
While that quarter-century-old sleight-of-hand doesn’t play a role in the current fudging of the unemployment rate, it does show the importance, for policy purposes, of knowing what the real unemployment is in the US, not whitewashing the statistics.
In fact, the BLS also has what is known by academics, government bureaucrats and industry analysts as the “real” unemployment rate, known as the U-6 rate. This figure adds to the U-3 rate so-called “discouraged” workers who have stopped looking for work because they know that no jobs are available to them where they live, or who have found part-time employment but who want full-time work again. The April U-6 “real” unemployment figure according to the BLS, was 22.8%, but again, because that figure includes the same nearly 5 five percent error that the BLS said was in its U-3 figure, the real “real” U-6 unemployment rate should have been 27.8 percent. And the headline we should have been seen blaring at us in Moon Landing-sized bold letters the morning of May 9 should have been: Unemployment Now Worse Than in the Great Depression!
That is important because we need to know how today’s economic crisis compares to the benchmark disaster known as the Great Depression of 1929-39. As it turns out, our country’s current economic collapse has already left that benchmark when the unemployment rate peaked at 24.9 percent of the labor force in 1933, in the dust. This past month’s U-6 rate, which is a close analogue to how joblessness was counted by the government back in the 1930s (you either were working or you were not working!), today’s jobless are 11.3 percent more numerous than their forebears in the Depression as a percentage of the total workforce.
Now most of us know that during that Great Depression, one of this country’s greatest and most popular presidents, Franklin Delano Roosevelt, a Democrat who was elected in 1932 and re-elected to the White House three times, instituted massive public jobs programs, launched huge projects like the Tennessee Valley Authority, the Rural Electrification Program, highway construction, etc., and established unemployment insurance and the Social Security Administration to provide subsistence pensions to the nation’s elderly and disabled.
Washington is failing to respond adequately to this crisis
With a crisis today that by the numbers is clearly significantly worse than what FDR confronted, what are we getting from Washington’s leaders? A puny one-time sop of a $1200 income tax credit per adult plus $500 per child for most, but not all citizens, a short-term boost to unemployment benefits for the over 40 million who have been laid off by their employers, no public project spending other than a pittance for a wall on part of the Mexican border, cuts in public health funding, and massive multi-trillion-dollar bailouts of the banking, airline, oil and arms industries.
This dysfunctional Congress can’t even manage to pass an extension beyond the basic 13 – 20 weeks for unemployment benefits.
Meanwhile, getting back to the cause of this crisis — the Coronavirus Pandemic — the main reason that the US, with just five percent of the world’s population, and despite being the wealthiest nation on earth with at least technologically the best health system in the world, has one-third of all cases of coronavirus and accounts for 27 percent of global deaths from the disease, is that so many in the US have no health insurance.
And as unemployment, now standing at about 40 million people, continues to rise, as it is predicted to continue to do through the summer, the majority of those losing their jobs and their families, are also, thanks to this country’s bizarre reliance upon employers as the primary provider of health insurance, losing their medical coverage. Researchers at the Robert Wood Johnson Foundation and the Urban Institute predict that as many as 43 million Americans — workers and their families — dependent upon their employer health insurance, could lose their coverage. Some of those would be able to get Medicaid coverage for the poor — a bureaucratic process which takes time. Others might become eligible to obtain subsidized insurance under what is left of the so-called Affordable Care Act, though the costs of that program can be prohibitive for many who have no income and no savings. Any way you cut it, tens of millions more Americans are being added to the 80 million who even before this crisis had either no insurance, or crummy insurance with deductibles so high they couldn’t afford to go to the doctor or bring family members to a doctor.
Things could get worse before they get better
Such a situation is an open invitation for the even wilder spread of a highly contagious disease like COVID-19 — which as I said above, is why we have such a serious health crisis here in the first place. It’s also why, if there is a risk of a second round of this plague possible this fall and winter, we should assume it’s going to happen.
John Williams is an economist who has been following the BLS and the US economy for decades. Founder of an outfit called Shadow Stats, he has labored to make the BLS’s rose-colored reports more honest. Williams, who has developed his own unemployment calculation, which he says corrects for deceptive tricks in the BLS’s U-3 and U-6 numbers, says that U-6 unemployment today should really be 37.9 percent and that his own measure, which includes everyone who wants a job but cannot get one, should be a staggering 48 percent today.
In light of that, he says it’s “highly doubtful that people are going to return to spending on non-essential things anytime soon.” Maybe if someone has a car that’s past repairing, they may buy or lease a new one, but not just to have a new car. As for going to restaurants, theaters and on vacations, those kinds of expenditures will be a long time in coming back, as will buying a new house or a first house. “To get back to where we were before this crisis began early this year,” he says, “could take two to five years, and in some ways we’ll probably never get back.” He notes that the US never did fully recover from the last “Great Recession,” for example in the areas of manufacturing and construction.
“In many ways, this is the worst economic collapse this country has ever seen,” says Williams. His warning is backed by recent warnings from some leading economists that as many as 42 percent of the record number of people currently losing their jobs may not get them back.
Meanwhile, if the Coronavirus Pandemic isn’t brought under control, and instead surges again into next year, it’s going to get a lot worse. All those new layoffs of people being left without health insurance are a bad sign that might just be what’s in store, barring a surprise breakthrough soon in testing capability and the in the development of reliable disease treatments and of a successful vaccine.
But let’s not end on a glum note. The Great Depression was a terrible ordeal for those who lived through it. (My own father remembers riding as a small child on the wagon with his family’s furniture from the house his parents owned that was foreclosed on to an apartment elsewhere in Flushing, NY. That was because his father had lost his job.) But whether because FDR, the “bankers’ candidate” who, as governor of New York, ran for president in 1932, had an epiphany and became a social democrat at heart or just figured he had to act to prevent a socialist revolution in America, that economic cataclysm led to a whole different America for over half a century — a country where the government provided a modest pension for the elderly and disabled, protected the right to form labor unions and to strike for better working conditions, where segregation by race in jobs, schools and restaurants was ultimately outlawed, where health care was provided for the elderly, disabled and eventually the poorest of the poor, and where banks became strictly regulated — all ideas that before 1929 had seemed unthinkable.
How the US, which has retreated from the New Deal and Great Society eras considerably, responds to this new cataclysm remains to be seen. What is clear is that what happens next will depend not on the people running things in Washington now, but on what the American people demand, and on how hard we are willing to fight for what we want.
Veteran investigative journalist DAVE LINDORFF was a 1978-9 Knight Bagehot Fellow in Business and Economic Journalism at Columbia University, a two time Fulbright Professor in China and Taiwan, a correspondent in Hong Kong and China for Business Week magazine in the 1990s and is 2019 winner of an “Izzy” award for “Outstanding Independent Journalism.” He is founder of the journalism website ThisCantBeHappening.net
