Trump may come to regret his big celebration of a small dip in unemployment
Though the unemployment rate remains in the double-digits, the official unemployment numbers are slightly lower than economists expected, prompting self-congratulations by President Donald Trump.
But experts say celebration is premature.
Indeed, the Bureau of Labor Statistics reported that the unemployment rate fell from 14.7 percent in April to 13.3 percent in May as the economy added 2.5 million jobs. The high April number was the worst that the American workforce had seen since monthly record-keeping began in 1948, and almost certainly the worst since the Great Depression. White House economic adviser Kevin Hassett predicted last month that unemployment would rise above 20 percent, a view that was widely shared by economists.
Trump took to Twitter to boast about the new numbers, tweeting "Great going President Trump (kidding but true)!" and "Oh no, the Dems are worried again. The only one that can kill this comeback is Sleepy Joe Biden!" He also tweeted, "Experts said we would lose 7.5 million jobs in May, but we added 2.5 million." He also connected the unemployment dip to the murder of George Floyd by a Minneapolis police officer, saying, "hopefully George is looking down and saying this is a great thing that's happening for our country. (It's) a great day for him. It's a great day for everybody."
There are a number of reasons to pause before celebrating these results, however. (And it should go without saying that there is no good reason to connect them to an unrelated hate crime.) For one thing, the gains were not evenly distributed: Black unemployment is at 16.8 percent while white unemployment is at 12.4 percent, a significant discrepancy. Latino women had a staggering 19 percent unemployment rate. Moreover, 20.7 million jobs vanished in April. That total doesn't even included all of the jobs that were lost prior to that month.
In any case, this still leaves more than 18 million Americans unemployed, with Trump's inadequate response to the pandemic seemingly the main culprit. Finally, a 13.3 percent unemployment rate is still far higher than anything seen during the Great Recession.
Notably, the discrepancy between the anticipated unemployment numbers and the ones released this month don't bode well for future economic growth, as Gabriel Mathy, a macroeconomist at American University, told Salon.
One reason, Mathy said, "is that employers must rehire their payroll to qualify for forgiveness of their PPP [Paycheck Protection Program] loans, and so many workers are being rehired for that reason. Whether they remain on the payroll once that program expires later this year remains to be seen."
Mathy also pointed out that the numbers do not include all of the workers who were furloughed, and are thus out of a job, because employers incorrectly classified them as "employed but not at work." He pointed out that "the BLS [Bureau of Labor Statistics] discussed this in their report, and perhaps there be ways to improve business reporting in future reports."
Mathy also told Salon that there were a number of factors complicating predictions about America's economic future. He noted that the number of coronavirus cases and deaths are significantly down from April and the government stimulus has helped people who would otherwise be suffering much more economically.
At the same time, "spending is still massively depressed and stimulus measures are scheduled to expire later this year, some as early as this summer." He added that investment is continuing to fall, businesses may contract because of reduced sales, forbearances on homeowners and renters may be suspended and state and local governments may need to cut more jobs unless they receive trillions in federal aid.
"The rosy jobs report today will reduce the perceived need to act to alleviate the crisis, and so may end up being a net negative, but making forecasts given all these conflicting impulses and the unprecedented nature of this crisis is very difficult," Mathy concluded. "However, given the weak recovery from the Great Recession, it is hard to see a scenario of a rapid recovery back to the booming economy we saw before the pandemic without continued stimulus and an eradication of the virus."
At least one prominent economist, New York Times columnist Paul Krugman, speculated on Twitter that "you can't completely discount the possibility that they've gotten to the BLS [Bureau of Labor Statistics], but it's much more likely that the models used to produce these numbers — they aren't really raw data — have gone haywire in a time of pandemic." Krugman later received pushback for this speculation and apologized, tweeting that "I was just covering myself, because so many weird things have happened lately. But I apologize for any suggestion that a highly professional agency might have been corrupted."
Yale University economist William Nordhaus told Salon by email that he also doubts the BLS would have deliberately produced misleading statistics, writing, "it seems unlikely. The Current Population Survey is too deeply embedded in the deep state for the incompetents in the White House to know what to do. Nixon tried to intervene at the BLS and failed."
Nordhaus' assessment was echoed by Princeton economist Henry Farber, who wrote to Salon that "I can't imagine that the numbers were influenced by the White House. The BLS has an elaborate procedure, run by serious career professionals, for generating and releasing these numbers."
Farber also argued that the less-terrible-than-expected results could be attributed to "the anticipated numbers being too pessimistic by not understanding the timing. The release this morning was based on conditions for the week of May 10-16, about 2 months after the crisis and shutdown began. Most of the employment reductions well predated this period (see the previous month's employment report covering the week of April 12-18), and it may be that things were beginning to open up by mid-May."
Austan Goolsbee, who served on President Barack Obama's Council of Economic Advisers, told Salon that America's long-term economic prospects are still not very good.
"The job market is still at basically the worst condition it has been in almost a century," Goolsbee explained. "This rebound filled only about 10 percent of the hole dug last month and we have to hope we get many, many more months in a row like this one or else we could be years from getting back to where we were before this started. I think it is still doable if we are getting a handle on containing the spread of the virus. If we don't do that, we won't succeed on the economy."