Last week, total initial unemployment insurance (UI) claims rose for the fourth straight week, from 1.6 million to 1.7 million. Of last week's 1.7 million, 884,000 applied for regular state UI and 839,000 applied for Pandemic Unemployment Assistance (PUA). A reminder: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits and expires at the end of this year.
Last week was the 25th week in a row total initial claims were far greater than the worst week of the Great Recession. If you restrict to regular state claims (because we didn't have PUA in the Great Recession), claims are still greater than the 2nd-worst week of the Great Recession. (Remember when looking back farther than two weeks, you must compare not-seasonally-adjusted data, because DOL changed—improved—the way they do seasonal adjustments starting with last week's release, but they unfortunately didn't correct the earlier data.)
Most states provide 26 weeks of regular state benefits. After an individual exhausts those benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of state UI benefits that is available only to people who were on regular state UI. Given that continuing claims for regular state benefits have been elevated since the third week in March, we should begin to see PEUC spike up dramatically soon (starting around the week ending September 19th—however, because of reporting delays for PEUC, we won't actually get PEUC data from September 19th until October 8th). It is also important to remember that people haven't just lost their jobs. An estimated 12 millionworkers and their family members have lost employer-provided health insurance due to COVID-19.
Figure A combines the most recent data on both continuing claims and initial claims to get a measure of the total number of people "on" unemployment benefits as of September 5th. DOL numbers indicate that right now, 32.4 million workers are either on unemployment benefits, have been approved and are waiting for benefits, or have applied recently and are waiting to get approved. But importantly, Figure A is an overestimate of the number of people "on" UI, for two reasons: (1) Some individuals are being counted twice. Regular state UI and PUA claims shouldbe non-overlapping—that is how DOL has directed state agencies to report them—but some individuals are erroneously being counted as being in both programs; (2) Some states are including some back weeks in their continuing PUA claims, which would also lead to double counting (the discussion around Figure 3 in this papercovers this issue well).
Figure B shows continuing claims in all programs over time (the latest data are for August 22). Continuing claims are more than 28 million above where they were a year ago. However, the above caveat about potential double counting applies here too, which means the trends over time should be interpreted with caution.
I have received many questions about how to square the UI numbers with the monthly jobs numbers. This thread from Jobs Day last Friday explains it (in particular, tweets six–eight show how the number of officially unemployed is "undercounted," and tweets 20–24 show how UI claims are overcounted).
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire at the end of July. Last week was the sixth week of unemployment in this pandemic for which recipients did not get the extra $600. That means most people on UI are now are forced to get by on the meager benefits that are in place without the extra payment, benefits which are typically around 40% of their pre-virus earnings. It goes without saying that most folks can't exist on 40% of prior earnings without experiencing a sharp drop in living standards and enormous pain.
In early August, President Trump issued a mockery of an executive memorandum. It was supposed to give recipients an additional $300 or $400 in benefits per week. But in reality, even this drastically reduced benefit will be extremely delayed for most workers, is only available for a few weeks, and is not available at all for many. This chart from The Century Foundation shows how much less in benefits people are getting under Trump's executive memorandum than they did under the CARES Act. The executive memorandum's main impact was to divert attention from the desperate need for the real relief that can only come through legislation. Congress must act, but Republicans in the Senate are blocking progress.
Blocking the $600 is terrible on both humanitarian and economic grounds. The extra $600 was supporting a huge amount of spending by people who now have to make drastic cuts. The spending made possible by the $600 was supporting 5.1 million jobs. Cutting that $600 means cutting those jobs—it means the workers who were providing the goods and services that UI recipients were spending that $600 on lose their jobs. The map in Figure B of this blog post shows many jobs will be lost by state now that the $600 unemployment benefit has been allowed to expire. The labor market is still 11.5 million jobs below where we were before the virus hit. Now is not the time to cut benefits that support jobs.
But what about the supposed work disincentive effect of the $600? Rigorous empirical studies show that any theoretical work disincentive effect of the $600 was so minor that it cannot even be detected. For example, a study by Yale economistsfound no evidence that recipients of more generous benefits were less likely to return to work, which is what we would expect to see if the extra payments really were a disincentive to work. And a case in point: in May/June/July—with the $600 in place—9.2 million people went back to work, and a large share of likely UI recipients who returned to work were making more on UI than their prior wage. The extra benefits did not stop them from going back. A job offer is too important at a time like this to be traded for a temporary increase in benefits, and when commentators ignore that, they are ignoring the realities of the lives of working people. Further, there are 8.5 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do. Dropping the $600 cannot incentivize people to get jobs that are not there. And, as Figure B shows, total continued claims in the most recent data are higher than they were when the $600 expired. It simply wasn't the $600 that was keeping people on UI, it was the fact that they can't find work.
Dropping the $600 is also exacerbating racial inequality. Due to the impact of historic and current systemic racism, Black and brown communities have seen more job loss in this recession, and have less wealth to fall back on. They are taking a much bigger hit with the expiration of the $600. This is particularly true for Black and brown women and their families, because in this recession, these women have seen the largest job losses of all. The Senate must extend the UI provisions of the CARES Act, both to provide relief to the jobless and to the bolster the broader economy.
Following the Great Recession of 2008-2009, Congress did little to help recovery, and we relied almost exclusively on actions from the Federal Reserve to spur recovery. That was a mistake.
It is Congress that has the tools that could end the economic crisis, and the Senate Republican caucus that is the roadblock to using these tools should be the focus of policy attention today.
While the Fed has shown better judgement than Congress in the last economic crises, the tools they currently have are too weak to spur the needed recovery. In the end, there is no good substitute for a dysfunctional Congress—and today's dysfunction is caused by Senate Republicans who refuse to act.
The economic shock of the coronavirus is very different from the housing bubble shock that caused the Great Recession of 2008-2009. Yet six months into the current crisis, we are in danger of repeating a same key mistake: leaning too hard on the Federal Reserve to navigate the crisis while ignoring the much more important role of a bloc in Congress that is blocking needed aid. While it is true that the Fed has shown better judgement over the course of this crisis, the tools it currently has available to address it are weak. The tools Congress has are strong, but their actions have been stymied by the mystifyingly bad judgement of Senate Republicans.
The Fed is an enormously powerful institution in many ways, but their policy tools are actually quite limited for boosting the economy out of a recession or even increasing the rate of growth during recoveries. The Fed can decisively slow economic expansions, and too often in the past they have done this explicitly to weaken workers' bargaining position and keep wage-driven pressure on prices from forming. In short, the Fed has a powerful brake but a very weak accelerator, and their use of this brake has merited much criticism in the past.
If the Fed is relatively weak in its ability to end recessions, why do its actions get so much attention during times of economic crisis? Mostly because the actions of Congress (dominated for the past decade by the Republican caucus in the Senate) have been either too weak or outright damaging during these crises. For example, in the weak recovery from the Great Recession of 2008-2009, austerity imposed by a Republican-led Congress throttled growth, even as historically aggressive actions by the Fed tried (only partly successful) to counter this fiscal drag. During this period, every new Fed decision about interest rate changes or quantitative easing (QE) sparked long and loud controversy, even while having a minimal economic effect. Yet the enormous cumulative damage of fiscal austerity stemming from Congressional actions like the Budget Control Act (BCA) of 2011 merited just a tiny fraction of this debate. Yet the damage done by the BCA utterly dwarfed the small (if admirable) attempts by the Fed to push the economy back to recovery.
In the current moment, there has been plenty of debate about what the Fed should do differently to ease the economic crisis. But again, it is Congress—hamstrung by Senate Republicans' refusal to act—which has all the power to end this crisis. And "end this crisis" is not an overstatement. The playbook for dealing with the current economic crisis is pretty obvious: provide relief for families with workers put out of work by the shock for as long as labor markets remain damaged, direct resources to state and local governments whose revenues have been savaged by the shock just as spending demands have risen, and spend every last dollar that would be useful for getting the virus under control. If the federal government is currently too dysfunctional to figure out how to spend these dollars to control the virus, then this means the aid to state and local governments should be that much greater.
Congress provided genuinely transformative relief to families in the CARES Act passed in March, but they cut off the aid far too early, assuming unrealistically that the virus would be under control in a matter of weeks. But for three months, the United States had a relatively generous and protective welfare state. There is no reason why Congress should not have continued this aid to families and provided generous and open-ended aid to state and local governments as well.
Some have argued that transferring resources to state and local governments is a power the Fed actually does have today, and that the Fed should take the lead on this. Some of these arguments are transparently cynical and meant only to justify congressional inaction. Others are more serious, and the Fed does have some scope here, but, again, the weaknesses of the Fed's tools are too often underappreciated. Essentially, the Fed has the power to make loans, not grants. Their current program that makes loans to state and local governments—the municipal liquidity facility (MLF)—charges these governments more than market interest rates for debt. From an economic point of view, this is clearly dumb—the Fed should try to make these loan terms as generous as possible.
But, it is telling that state and local government debt even outside the MLF does not seem to be growing very fast even with interest rates in these markets very low (after some hiccups in those markets in March and April, which were largely tamped down by the Fed's promised interventions). This was also true during the recovery from the Great Recession—very low municipal bond interest rates did not lead to a burst of state and local borrowing to support spending. What this should tell us is that the level of interest rates is not the real constraint here. Instead, it is state accounting and budget rules (set by law or in state constitutions) that provide a large hurdle for states thinking of taking on debt, whether market-based debt or debt through loans provided by the MLF. There is also ideology: The Republican electoral wave in 2010 led to governors and legislatures that were not going to spend more money regardless of how low interest rates on municipal bonds were.
If the Fed made radically large changes in how generous the terms of the MLF were (way beyond tweaking interest rates), would policymakers start quickly rewriting these state and local budgeting rules and begin piling on debt? For example, if the Fed charged negative interest rates on the loans and said that governments had 100 years to pay them back? From an economic viewpoint, this would indeed provide substantial relief to state and local governments. But, there are federal laws governing the loans the Fed can make, and it is far from clear that this would pass legal muster. While I wish it would pass muster—and I'm not that worried about the legality of this from a moral perspective—I worry that the Fed effectively usurping authority from Congress could spur Congress to respond with legislation that affirmatively reduced the future scope for the Fed to intervene during crises. Senate Republicans have made it very clear in the current moment that they do not want aid transferred to state and local governments. If the Fed declared it had the power to effectively transfer this aid and bypass Congress, would these Senators really sit idly by? This is a real potential cost to be reckoned with by those arguing for the Fed to test their legal limits super aggressively.
It's obvious why many focus on the Fed and wish it would be more transformative in helping the economy out of crises—the Fed has cleared the very low bar of showing some level of competence and judgement in recent crises, while Congress has completely stumbled. But it's Congress that has the tools needed to end the crisis, and it can use them anytime it wants. They—and the Senate Republican caucus that is the roadblock to using these tools—should be the focus of policy attention today. They shouldn't be let off the hook simply because we presume they're too incompetent (or malevolent) to be expected to act responsibly.
If a better Congress doesn't appear, it may well be the case that we need to think hard about giving the Fed more effective tools to fight recessions in the future. It's not impossible economically—we could give the Fed the legal right and administrative tools to transfer resources directly to people. But giving the Fed these expanded tools would require Congress to affirmatively grant them. In the end, there is no end-around a Congress that refuses to do what's right for U.S. families.
The current economic crisis has hit workers hard. Unemployment rates remain high, with total weekly initial claims for unemployment insurance benefits continuing to grow. Recent reports of a sharp rise in median earnings for full-time workers appear to complicate the picture. However, a more detailed examination of worker earnings and employment not only helps to sharpen our understanding of the devastating nature of the current crisis for working people, but makes clear that low wage workers are the hardest hit.
The labor department recently published data showing wages skyrocketing. As Federal Reserve Bank of San Francisco researchers reported in a recent Economic Letter:
Recent data show that median usual weekly earnings of full-time workers have grown 10.4 percent over the four quarters preceding the second quarter of 2020. This is a 6.4 percentage point acceleration compared with the fourth quarter of 2019. The median usual weekly earnings measure that we focus on here is not an exception. Other measures of wage growth—like average hourly earnings and compensation per hour—show similar spikes.
The spike can be seen in the movement in the blue line in the figure below (which is taken from the Economic Letter). As we can see, nominal average weekly earnings for full-time employees grew by 10.4 percent between spring of 2019 and spring of 2020, the fastest rate of growth in nearly 40 years.
While this earnings trend suggests a strong labor market, it is, as the researchers correctly note, highly misleading. The reason is that this measure has been distorted by the massive loss of jobs disproportionally suffered by low wage full-time workers. The decline in the number of full-time low wage workers has been large enough to change the earnings distribution, leading to a steadily growing value for the median earnings of the remaining full-time workers.
In other words, the spike in median earnings is not the result of currently employed workers enjoying significant wage gains. This becomes clear when we adjust for the decline in employment by only considering the nominal median earnings of those workers that remained employed full-time throughout the past year. As the downward movement in the green line in the above figure shows, the gains in medium earnings for those continuously employed has been small and falling.
Disproportionate job losses for full-time low-wage workers
The researchers confirmed that it was low-wage workers that have disproportionately suffered job losses by calculating the earnings distribution of the full-time workers forced to exit to, in the words of the researchers, "nonemployment" – by which they mean either unemployment or nonparticipation — each month over the past two decades.
They began by estimating the yearly share of full-time worker exits to unemployment and nonparticipation. As we see in the figure above, in non-recession years, about 7 percent of those with full-time jobs become nonemployed each year—2 percent become unemployed and 5 percent leave the labor force. During the Great Recession, nonemployment peaked in August 2009 at 11 percent, with most of the increase driven by a sharp rise in unemployment (as shown by the big bump in green area). There was little change in the rate at which full-time workers dropped out of the labor force.
The severity of our current crisis is captured by the dramatic rise in the share of workers exiting full-time employment beginning in March 2020. Exits to nonemployment peaked in May 2020 at 17 percent, with 9 percent moving to unemployment and 8 percent to nonparticipation. Not only is this almost twice as high as during the Great Recession, the extremely challenging state of the labor market is underscored by the fact that the share of nonemployed who chose nonparticipation and thus exit from the labor market was almost as great as the share who remained part of the labor force and classified as unemployed.
The next figure shows the share of workers exiting to nonemployment by their position in the wage distribution. The three areas depict exits by workers in the lowest quarter of the earnings distribution, the second lowest quarter, and the top half, respectively.
As the researchers explain,
In the months following the onset of COVID-19, workers in the bottom 25 percent of the earnings distribution made up about half of the exits to nonemployment. In contrast, the top half of the distribution only accounted for about a third of the exits. . . .
Therefore, the recent spike in aggregate nominal wage growth does not reflect the benefits of pay raises and a strong labor market for workers. Instead, it is the result of the high levels of job loss among low-income workers since the start of the pandemic.
Tragically, low wage workers have not only suffered disproportional job losses during this pandemic. Those who remain employed are increasingly being victimized by wage theft. As Igor Derysh, writing in Salon, notes: "A paper released this week by the . . . Washington Center for Equitable Growth found that minimum wage violations have roughly doubled compared to the period before the pandemic."
These are indeed hard times for almost all working people but, perhaps not surprisingly, those at the bottom of the wage distribution are suffering the most.
Last Wednesday NBA players refused to take the court for their playoff games in order to protest the latest police shooting of an unarmed Black man, Jacob Blake of Kenosha, Wisconsin, who survived the shooting but is now paralyzed. In response, the Milwaukee Bucks refused to play their scheduled game. This shocking announcement reverberated throughout the sports world, and the Bucks were soon joined by all the other NBA playoff teams, the Women's NBA, Major League Soccer (MLS), and several Major League Baseball (MLB) teams.
Most media outlets didn't know how to respond to the job action. They couldn't even figure out what to call it. Many journalists described it as a boycott, while others simply reported that the games had been 'canceled' or 'postponed.'
The answer has a lot to do with Kelly herself. She grew up without cable, without the internet, or even the occasional rap CD in Chatsworth, NJ, a place she describes as a "poor, working class, white rural community." Born in the late 1980s to a working-class family (her dad and her uncles are in construction), she became a devoted fan of heavy metal music in her teen years. As Kelly told me, "Heavy metal is the music of the disaffected working class, and it is not very well understood. Heavy metal was forged in a factory. It is an outcast and underappreciated art form, often trashed by mainstream music critics."
While working toward her goal of writing about heavy metal for a living, Kelly did virtually every job in the industry, from band PR to merchandise sales, all the while contributing to college papers, zines, and blogs. Eventually she got a job as the heavy metal editor for Vice magazine.
Kelly's interest in the labor movement started the old-fashioned way: she joined it. According to New Labor Forum, not long after Kelly became a "permalancer" at Vice, a co-worker reached out to her about the idea of unionizing the online publication, and she was "immediately on board." It took them just two weeks to get a majority of Vice writers to sign union cards, joining up with the Writers Guild of America. The next thing she knew, Kelly was on the bargaining committee and was helping to negotiate their first contract.
Kelly understands that the magazine's target audience, young women between 13 and 24, are part of an extremely well informed and politically active generation. She points to phenomena like IRA TikTok and Communist TikTok. "There are kids on Twitter who know more about anarchist theory than I ever will. You can stream any record you want in the course of an afternoon. Information access is contributing to the politization of teens," she says.
Teen Vogue has come under attack from conservative media personalities such as Tucker Carlson. It has also been called out for turning wokeness into a slick commodity. But the quality — and the success — of the Teen Vogue labor column points to some long-standing contradictions within corporate media, as well as emerging phenomena in American society.
First, the contradiction: capitalist media, especially in times of extreme competition, will sponsor content that undermines and/or contradicts some of the goals of a capitalist agenda. This contradiction allows Teen Vogue/Condé Nast to pay Kelly to write a labor column in which she critiques capitalism while also selling ad space to Target, IBM, Verizon, Light Life Plant Based Burgers, Ulta, and Tressemé (to name a few), all of which hope to win new converts among young feminists, teens of color, LBGTQ youth, adolescent Democratic Socialists, tween anarchists, and those Communist-curious who are still too young to drink.
The emerging phenomena include a new hunger among younger Americans for useful, accessible information about how to organize. After all, Teen Vogue'saudience today is tomorrow's labor force. The American working class is, no longer, as Kelly, quipped, "male, pale and stale." Working-class Americans are younger, and they include a majority of women workers, more workers who identify as LGBTQ, more immigrants, and more workers who are black, indigenous, people of color (BIPOC). As Kelly puts it, there are "a million ways to be working class."
As a union member herself, Kelly doesn't just come from a working-class background. She is a leader of the new working class. And she is gaining positive attention for her work. Since she started contributing to Teen Vogue she has been interviewed by the State of the Union podcast and the Real News Network, and she has been called the "coolest person on the internet." This summer she signed a book deal with One Signal to write a history of the labor movement, Fight Like Hell. She plans to feature the labor struggles of women, immigrants, people of color, and LGBTQ workers that do not always get covered in mainstream, academic labor tomes.
As Mother Jones famously said, "Pray for the dead and fight like hell for the living." And, while you're at it, read some of Kim Kelly's "No Class." Her labor columns are some of the most inspiring writings on class that I've read in a long time.