If you’re reading this, you’ve seen the numbers. Ten million new unemployment filings in a two week period. That moves the national unemployment rate from the mid-3s to about 10%. Bad enough, and historically unprecedented in this short a time. But we’re only part way there. Expect another 8 to 10 million filings in the next two weeks. Many recently unemployed people are still trying to file. States like Florida are just beginning to take the steps others did weeks ago.
Within two weeks, the unemployment rate will reach 17 to 18%. That’s the worst number since 1938. We’ll have gone from about as good as the unemployment number can be (in the 3s) to the post-World War II “hey, there’s a real problem here” number of 10%, to the nobody currently in the job market was alive then 17-18%. Within the realm of historical precedent, there’s only one remaining leap. To approximately 25%, a number seen during the depths of the Great Depression in 1932-33, and (if we trust the ancient data estimates) in the aftermath of the Panic of 1893.
That may take no more than a month. Airlines and chain restaurants, among others, still have more people to lay off. The SBA program for small business payroll assistance is a useful program. Many businesses qualify. It’s set up in a way that will truly help. Except Congress didn’t appropriate enough to help all of the qualifying businesses. Yesterday, Bank of America became the first major institution to launch their portal. It crashed repeatedly. And even so, 6% of the available funds are now already applied for. One day. One institution. One overwhelmed web portal.
It took three years to get from the 1929 stock market crash to maximum historical unemployment. It will likely take 6 weeks this time. That does not count small business owners, who, left at least temporarily without their businesses, do not qualify for unemployment and will frequently not count in the numbers. When a quarter of the country was out of work in the mid 1890s, another quarter of the country still lived on the farm. They could at least feed themselves. A century and a quarter ago, many fewer properties were mortgaged.
I doubt most of us would want to go back in time to that era. Many jobs were horribly dangerous, kids were working in coal mines, life expectancy was short, and while we pine for toilet paper, most Americans in those days lacked indoor plumbing. But in some key ways, our modern economy has more exposure than that one did. On the other hand, government intervention was unheard of then. Grover Cleveland wasn’t up for doing any of the most basic things we expect now.
Now we figure the federal government can and should print and/or borrow as much as necessary to bail out as much of the economy as possible until things get back to normal. Unlike everything else, there’s not a huge split between right, left, and center on this. Sure, President Trump and Mitch McConnell wanted a slush fund for big corporate bailouts, while AOC thinks Coronabailouts are a good reason for reparations, but most of the country is mostly in the same place in thinking the government should move aggressively to prop up the economy, deficits be dammed.
But it’s not that easy. As bad as the 2008-09 Great Recession was, the mission was straightforward; to avoid a repeat of 1929 and the aftermath. A financial collapse risked putting the rest of the global economy under. It was years in the making and at least many months in the revealing. While the collapse of Lehman Brothers was equivalent to the NBA shutting down on the Coronatimeline, Bear Stearns failed months before. Then other dominoes fell. Months passed between Lehman and the Auto bailout. Years followed before the foreclosure wave was done. That’s a normal pace for a post-crash situation.
Not only did this happen way faster, but we aren’t sure if we’re patching to make sure we can return to normalcy in several weeks to a few months, or if the entire underpinnings of our several decade-long understanding of what to expect in rich countries is done. Consider this. While increasingly large numbers of Americans are out of work, others are working more overtime than ever. The medical profession is an obvious example, but most startup employees and leaders are scrambling too. And with their remote capabilities, not being hindered as much by quarantine. If you are an owner, manager, or key hourly employee at a restaurant attempting to convert from mostly dine in to completely dine out, you’re putting in hours too. So are delivery people of all kinds, grocery store workers, etc.
The total amount of work being done isn’t dropping as quickly as the employment rate. Which begs a question. Is there a fair way to handle this? If we’re talking about a few weeks, whatever. Life isn’t fair, and those of us who are getting to make regular contributions can at least feel good about that while trying to locate appropriate PPE options. For many, it’s better to be overworked and getting a paycheck than quarantined and hoping the government comes through and creditors stay reasonable.
Should this last longer, and/or recur semi-regularly until a vaccine is safe for wide distribution, it’s another matter. Traditionally, unemployment is seen as something that is at least a little bit the responsibility of the person without a job. That’s why benefits have a defined expiration time. During times of recession and noticeable economic dislocation, the benefits last longer, as people are assumed to need more time to find work. They’re even encouraged to relocate to places where the job market is better.
This isn’t that. People are supposed to shelter in place, not traverse the country looking for a job. Unlike normal recession-induced layoffs, where a company can cut 20% of their workforce, and have others think, “well, that’s unfortunate, but 80% kept their jobs, those cut must have been not as essential, a bit overpaid, etc.,” this time, whole industries are effectively shuttered. A cosmetologist isn’t requiring help because she’s below-average at coloring hair. It’s because her state or local government isn’t allowing her to work. And if this continues long enough, many of her customers may not be able to afford her even when she is allowed to return.
The concept of unemployment having at least some tangential connection to the capabilities or willingness to adjust of the person being unemployed is pretty much severed at this point. Sure there are delivery jobs available, but those are unquestionably risky. We don’t normally figure an unemployed person is supposed to put their life, or that of at-risk members of their household on the line in order to find work.
So for the first time ever, unemployment is completely beyond the control of the majority of benefit applicants and recipients. Those who are unable to pay their rent, mortgage, or other obligations are dealing with a rainy day it was hard to imagine preparing for. Plus, our economy was partially based on people not saving for an unimaginable event and continuing to spend most of their available resources.
All this, while a large section of the country, many of whom are salaried, overtime exempt, are working harder than ever. While lower-level, hourly workers are the most likely to be in the path of Rona. You can’t criticize the unemployed for being so, but it’s hard to think it’s fair for the employed to continue carrying the collective burden for much longer. Most of the entities still employing are feeling their own financial pressure.
This is not a financial windfall for hospitals and medical systems. They’re losing (or have already lost) the ability to do the profitable elective surgeries that keep them in the black. Nurses and other key providers do get overtime, and will increase labor costs while revenues decline. Many patients are either un/under-insured or even more likely on Medicare, none of which pays a medical system sustainably.
Should this continue in to the summer, we’re going to need an entirely different social contract, created on the fly, without any of the normal thought and time that usually goes in to a major societal adjustment. By the time FDR took his oath of office and said “the only thing to fear is fear itself,” implemented a several day bank holiday, and created new government agencies and programs virtually overnight, Americans had over three years of post-crash conditions to absorb. It’s not just that Herbert Hoover didn’t have the “vision” to attempt what FDR did. There was no appetite for huge-scale government intervention in 1930. Other financial panics had caused temporary downturns. Depressions were common in the several decades prior to that one. It was the “Great” Depression because of the severity and more importantly, duration.
Yes, the Federal Reserve can continue making capital magically appear. Congress can deficit spend a bit further before the Dollar ceases being the world’s reserve currency. Other Western Democracies will need to do similar things. Money is a pretend thing anyway, we can all pretend it’s ok to create another $20 trillion or so. But that won’t solve the social contract issue. Somehow, we’re going to need to think about what might be fair, try to get that implemented, and then be willing to adjust when we realize the first attempt was well-intentioned but mistaken.
On the one hand, if there was ever a time where the country seemed ill-suited to do so, it’s now. On the other, this may be such a huge disruption that it buries some of the existing acrimony. There are people of all political persuasions on each side of the overworked/not allowed to work divide.
Have I mentioned the future looks a mite cloudy?