Analysis & Insights

Unemployment and its Implications for a Quick Recovery
by
Julian Kelly
07-Jul-2020

As the month of June came to a close, the US economy appeared to be on track for a swift recovery. The COVID-19 mortality rate was declining, dozens of states were reopening their economies, and The Bureau of Labor Statistics (BLS) announced the job market had added 4.5 million jobs for the month. The fabled “V-shaped” recovery seemed to be materializing.

However, the rosy jobs report should be viewed cautiously as it contains two fatal flaws. First, the timing of its release means the data it contained failed to account for developments that precipitated in the preceding days. Namely, that a handful of states in the South and West United States were experiencing staggering spikes in positive cases. As cases and hospitalizations climbed in Texas, Arizona, and California, certain businesses in those states were ordered to reclose by their respective governors. Those businesses are inevitably furloughing or laying off more employees. With those states still struggling to contain the virus, next month’s jobs report is expected to show another spike in unemployment.

Second, and more importantly, the June jobs report revealed that permanent layoffs are rising as a percentage of total layoffs even as temporary layoffs are falling. An analysis by FiveThirtyEight showed 88.6% of layoffs in April and May were classified by BLS as “temporary” – that figure fell to 78.6% in June, indicating businesses are less optimistic about their ability to quickly bring employees back in. If this downward trend continues amid a worsening public health situation, workers filing new unemployment claims will likely require assistance longer than previous claimants. This scenario would all but eliminate the possibility of a quick “V-shaped” recovery. Furthermore, the current federal policy which provides expanded economic relief is ill equipped to handle this possibility.

Two key protections provided under the CARES Act are set to expire on July 31st which have the potential to devastate the financial situation for millions of Americans. They are the minimum payroll requirement stipulated in the Payroll Protection Program and the exemption to defer mortgage payments. These protections, coupled with the one-time stimulus checks, have kept millions of American households afloat through the economic downturn. But if these protections are not extended through new legislation, the likelihood of millions more layoffs and evictions in August and September is high. With only three working weeks before the August recess, Congress will need to quickly craft a comprehensive fourth stimulus bill which provides greater job security if they hope to prevent further economic crisis.

Julian Kelly

Julian Kelly

Policy Intern
Medford, MA

Julian Kelly is a graduate student at The Fletcher School of Law and Diplomacy where he focuses on international security and diplomatic studies. The son of a Taiwanese immigrant, he has a strong professional and personal interest in East Asian security issues - hoping to eventually turn his education and passion for public service into a career U.S. Diplomat. Before attending The Fletcher School, Julian previously taught English and studied Mandarin in Taiwan as well as interned with Speaker Pelosi in the U.S. House of Representatives. In his free time, Julian enjoys baking bread and shooting film photography.

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