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What the latest jobs numbers say about a U.S. economic recovery

The number of weekly jobless claims is the lowest since the economic shutdown began in March, but it remains far above what the U.S. has experienced during other financial crises. Jerome Powell, chairman of the Federal Reserve, said earlier this week that he expects unemployment to remain elevated for years to come. David Wessel of the Brookings Institution joins Judy Woodruff to discuss.

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  • Judy Woodruff:

    The number of weekly unemployment claims we reported a few minutes ago is the lowest since the shutdown of the economy began in March, but it remains far above what we have seen in other financial crises.

    It follows Federal Reserve Chairman Jerome Powell saying he expects unemployment at the end of 2020 to top 9 percent and to remain elevated for years to come.

    To help us look into these numbers and the broader economic concerns they raise, we turn to David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

    Hello again, David Wessel.

    So, how are we to interpret all of this? We see the markets today reacting negatively to news that the coronavirus rising in a number of states, and yet we see unemployment — we see unemployment continuing, but better than it had been in recent months.

    What direction do we look when we see these numbers, David?

  • David Wessel:

    Well, I think it's really important to separate out what the markets are doing from the real economy.

    I think the labor market is terrible. There are now 30 million people collecting unemployment benefits. That's nearly 20 percent of the work force. And we — it's good, because it means that even those people out of work, they're actually having some income.

    But it's going to be a long, slow climb out of this COVID recession. And I think what happened in the markets is, the markets basically overreacted initially. Stocks fell 30 percent. Then we had a euphoric moment. The stocks recovered all their lost ground.

    And then, in the last couple days, they have given up 10 percent. So the stock market is now 10 percent lower than it was before COVID. And that seems to me about the right place where it should be.

  • Judy Woodruff:

    And then we have, as we mentioned, the chairman of the Federal Reserve, Jay Powell, saying he expects unemployment to be over 9 percent still by the end of this year, only slowly coming down.

    Americans can't be excited about that.

  • David Wessel:

    Right.

    I mean, I think that Chair Powell was trying to do two things. One is be realistic with the American people, explain to them that we're not going to come out of this quickly, and, secondly, put some pressure on Congress to do something.

    We can have lower unemployment by year-end if we get more help from Congress. That was the chairman's message, I think.

  • Judy Woodruff:

    So, sending a signal to the Congress.

    David, I also want to ask you about this census survey of small businesses, first week of June showing that fewer small businesses — while fewer of them are cutting hours, in all, more of them are cutting than increasing. How do we read that?

  • David Wessel:

    Right.

    So, one of the things — and I'm sorry — I think I probably have a bad connection. I apologize for that.

    One of the good things that's happened at the Census Bureau is, they have been doing these weekly surveys of households and small businesses. And they — it's a sign of just how bad things are. Twice as many small businesses cut hours in the first last week of June, 26 percent, than increased them, 12 percent.

    So it's — we are not out of the woods yet. And even though we see this modest improvement in the job market, it's really hard to overstate just how bad the economy is, and how hard it's going to be for us to recover from this, because people are going to be reluctant to spend. Businesses are going to be reluctant to reopen.

    How many of us are going to get on an airplane in the next few months? This is going to be a long, slow slog.

  • Judy Woodruff:

    And, David, economists have been saying it's going to take a vaccine, it's going to take some dramatic piece of new information or science to make people feel more comfortable.

    Is that still what the economists you talk to are saying?

  • David Wessel:

    I don't think we really know how people are going to behave. This is such an unusual event.

    So, we see now that people seem to be getting a little impatient with the lockdown. And so we will have to see, do people come out of their houses? Are they willing to go back to the malls? Will the offices reopen? And if they do, will that — will we be met with a second wave of COVID in the fall, and that will send us all back into our houses?

    So I think that there are three things that we have to worry about. One is the science, the treatment and the vaccines. Two is how people react. And everybody's guessing. Nobody really knows. And third is, how much sustained support will the economy get from the federal government until we're past this horrible episode in history?

  • Judy Woodruff:

    Well, I know people want answers. And what we're hearing is, it's just hard to come up with definitive answers right now. We just keep paying close attention.

    David Wessel, thank you so much.

  • David Wessel:

    You're welcome.

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