The worst jobs report in history shows why the economy must reopen.
When we wrote on March 19 about “Rethinking the Coronavirus Shutdown,” the reaction in elite media quarters was horror and denunciation. Well, after Friday’s horrific jobs report, how do you like the shutdown now? The people who said we have to sacrifice the economy to crush the virus have succeeded in the former even as the virus will be with us for many more months or longer.
Unemployment in April soared to 14.7%—the highest rate since the government started keeping records in 1948—while employers shed 20.5 million more jobs after losing 870,000 in March. The labor-market bleeding is even worse than those numbers suggest since 6.4 million workers left the workforce.
Labor participation had been trending upward the past two years as faster job growth drew millions of low-income Americans from the sidelines. But the participation rate has now fallen 3.2 percentage points to 60.2% since a recent peak in February, the lowest since 1973 before large numbers of women started working.
Much of the media continue to treat the economic destruction as a sideshow and present a false choice between saving lives and jobs. But this is the fastest jobs collapse in modern history. The Great Depression drove millions of Americans into poverty and caused many suicides, and there’s a substantial risk this could happen again.
Mental-health crisis hotlines are reporting spikes in calls. According to Express Scripts, anti-anxiety prescriptions increased by a third between mid-February and mid-March. Many in despair will probably turn to alcohol or narcotics. CVS executives warned this week that delayed care could lead to a surge of non-coronavirus related health problems. They include cancers undiagnosed and illnesses left untreated.
Hospitals have also had to cancel elective procedures, which is how they make most of their money. Stanford Health Care is cutting pay by 20% for its 14,000 workers. The California Medical Association reported that revenues at private practices have declined by two-thirds since March 1, and half have furloughed or laid off staff.
Congress has appropriated $175 billion to shore up hospitals, but this won’t help small physician practices much. Many health-care providers warn they may not survive if their privately insured patients lose jobs and sign up for Medicaid, which doesn’t cover their costs.
Businesses are also going under. This week J.Crew and Neiman Marcus filed for bankruptcy, and many more will follow. Some over-leveraged companies may have failed anyway, but many small businesses that were healthy before the government-induced coma are closing permanently. Consider Griswold’s Tavern in Newport, Rhode Island, or an iconic Italian bistro Biba in Sacramento, both of which had been around since the 1980s.
ADP this week reported that small businesses shed 11 million jobs in April. According to the Labor report, 8.2 million leisure and hospitality jobs—about half of the industry—have been eliminated in two months. Many Democrats seem to think this is no big deal since many laid-off workers will be able to collect enhanced unemployment benefits that pay more than their wages. But what happens in a few months if their employers no longer exist?
The crowd that demands the economy remain locked-down until there’s a vaccine, miracle therapy or daily testing of everyone in the country seem to think the government can replace the private economy. That’s a fantasy, and they are betraying the very low- and middle-income workers they claim to represent. Average wages in April rose sharply because so many low-income workers were laid off.
While they blame President Trump for the economic pain, Democratic leaders want to keep the economy sedated far longer to ease pressure on the health-care system. California Gov. Gavin Newsom this week relaxed his state stay-at-home order, but most Bay Area counties have extended their lockdowns through May 31 even though they have relatively few deaths and thousands of unused hospital beds.
Even in New York City, 26% of hospital beds and 21% of intensive care units are now free. After a seven-week lockdown, thousands of New Yorkers are still testing positive and hundreds are hospitalized each day. “Government has done everything it could. Society has done everything it could,” Gov. Andrew Cuomo said.
He’s right, but then why not reopen? Americans need to work to make a living, and they want to work. But the longer the shutdowns go on, the more furloughs become long-lasting unemployment. Many Americans who quit the labor force during the 2008-2009 recession took years to return, and some never did. Who knows how many won’t this time?
It is important to stress that the strict lockdowns were a government policy choice. But the damage is done, and our focus isn’t on recriminations. The issue is what to do now, and the public is wise enough to know that public health can’t be sustained without a healthy economy. Americans can see the destruction all around them. They know the virus will be with us for a long time unless there’s a vaccine, so we have to learn to live with it and have a functioning economy.
No politician wants to admit it, but we are moving to a de facto policy that gives people and businesses the leeway to open and make their own risk calculations. Most Americans are smart enough to know they need to take precautions and social distance, and businesses have no incentive to endanger their employees. Meat packers are learning that lesson the hard way.
The tradeoff isn’t between lives and livelihoods. The policy goal has to be to protect both as much as possible. Deploy more personal protective equipment, greatly increase testing, build surge capability to handle flare-ups, and isolate society’s most vulnerable to keep hospitals from getting overwhelmed. But for heaven’s sake reopen the economy so we don’t consign millions to years of poverty.
