A quick recovery?
Attractive unemployment figures
Last week, the US Bureau of Labor Statistics reported the figures on the US labour market. For example, considerably fewer people had applied for unemployment benefit than had been expected by analysts. More important, however, was the fall in unemployment. It had fallen to 8.4%, which was also considerably less than the expected 9.8%. For the first time since the outbreak of the corona crisis, it had fallen below 10%. Almost 1.4 million jobs were created in August, including in hotels and bars. Around half of the jobs lost earlier this year would have been ‘back’. During his election campaign, the President spoke of the ‘fastest recovery ever in American history’.
Judging from the above figures, this statement seems correct. There are, however, some comments to be made. Firstly, the fall in the unemployment rate was mainly the result of a new census. Without this change, around 1 million Americans would probably have applied for benefits, as many as the month before. The unemployment rate would probably have been around 9.1%, not 8.4%. But that is not the main objection to too much euphoria about these figures. More importantly, one in two workers made redundant in the pandemic has still not found a new job.
Temporarily becoming permanent
In reality, more and more unemployment is proving to be permanent rather than temporary. For although unemployment is falling faster than expected, wages are rising faster and the number of hours worked is increasing, the number of Americans who have lost their jobs permanently rose by more than 500 000 in August. In July, half of the Americans who were temporarily laid off had already been unemployed for 15 weeks or more. In August, that figure had already risen to two thirds. The Federal Reserve, the American Central Bank, had already expressed serious concerns about this. The Fed no longer sees inflation as a priority, but the labour market.
The pandemic has accelerated two long-standing trends. Smaller businesses – the backbone of the economy – are rapidly dying out. Meanwhile, the stock market is setting record after record, led by a number of giant technology companies. Do not forget that small and medium-sized enterprises in the United States account for 85% of new jobs and about half of the total workforce. A process that has been going on for decades as a result of globalisation and digitisation has accelerated during this pandemic. Fewer small businesses, fewer jobs and virtually no wage growth since the 1970s. Add to that the Amazonisation of retail (many small retailers have now disappeared) and the situation seems clear.
Economists are already talking about a K-shaped recovery. The ascending line of the K would represent the technology sector and the descending line would represent the badly affected old economy. However, there is another way of looking at this. The ascending line stands for those who have a well-paid job and an equity portfolio. The downward trend is for the long-term unemployed and workers who have not had a wage increase for decades and who are constantly living with job insecurity. The President was elected four years ago partly because this situation has existed in the United States for longer than today. However, he seems to be focusing his policy on the K upward trend when he talks about the rising stock market and the ‘rapid’ recovery of the economy. As long as the Fed remains focused on a policy of low interest-rates and cheap money, this situation will not change.
Winners and losers
This is a situation in which more and more Americans are having to dig deeper and deeper into debt in order to survive. A situation in which a large part of the population has to live in constant economic uncertainty. A situation in which the difference between the winners and the losers in this crisis is widening. There is no broad-based economic recovery here. The winners of this crisis also have an interest in a ‘broader’ recovery. Otherwise, over time, they too will no longer be winners.