The Daily - The Pandemic Economy in 7 Numbers

Episode Date: November 19, 2020

There are several figures that tell the story of the American economy right now.Some are surprisingly positive — the housing market is booming — while others paint a more dire picture.Using seven key numbers, we look at the sectors that have been affected most profoundly and consider what the path to recovery might look like.Guest: Ben Casselman, who covers economics and business for The New York Times, walks us through the pandemic’s impact.We want to hear from you. Fill out our survey about The Daily and other shows at: nytimes.com/thedailysurveyFor more information on today’s episode, visit nytimes.com/thedaily Background reading: Here is Ben’s snapshot of the key data points for understanding the impact of the pandemic on the economy.The expiration of two critical programs at the end of this year could leave millions of Americans vulnerable and short-circuit the nation’s precarious recovery.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, as local governments begin reimposing restrictions, a check-in on the state of the pandemic economy. My colleague Ben Castleman with seven data points. It's Thursday, November 19th. Ben, it feels like there are a lot of ways to tell the story of the American economy right now. There's the human-level stories of the economy.

There are the policies that are in place or that are not in place, but perhaps should be. And then there's the raw data. And because it's been a while since we last talked about the economy on the show, we wanted to approach it through the data so we can really get a handle on where the economy stands. And as it happens, I know that you have been knee deep in that data. Michael, I'm always knee-deep in the data. But yes, I have been especially knee-deep in the data recently, sort of trying to figure out where we are in this economy and where we're going. And I've brought you seven numbers today that I think maybe help tell that story a little bit. Okay. So let's start with the first number, the first data point.

What is it? That would be 10 million. And what is that number? So that's the total number of jobs that we've lost in the U.S. since February. So we lost about 22 million jobs in March and April. And we've gained about 12 million of those back. But that still leaves us in a hole of about 10 million jobs. But what's interesting about that, Ben, is that from that really awful number of 22 million jobs lost, we have regained something like half of them. More than half.

Right. You know, that's pretty good in a lot of ways. It's much faster than a lot of people anticipated when we were having some of these conversations last spring. But it's also 10 million fewer jobs than we had before the pandemic began. And just to give you a little bit of context there, we lost about 9 million jobs in the whole Great Recession a decade ago. Right. So if you think back to that time that was, you know, the worst recession since the Great Depression, this, you know, catastrophic feeling moment in the American economy, we still, even after the rebound we've seen so far, we still are in a deeper hole now than we were at the worst moment of that recession.

Well, given that we already know that we are in a pretty awful pandemic economy, I wonder if we can take the glass half full approach here and ask you what accounts for the recouping of more than half of those jobs? which is 7.2%, which is the growth in consumer spending on goods from January through September. So this is what consumers, you and me, most of our listeners, what we spend on stuff, on anything from cars to groceries to Peloton bikes to you name it. And that spending is actually higher now,

not just higher than at the worst of the pandemic, but higher than before the pandemic. It's actually grown. Huh. And how do you account for that? Well, I don't know about you, Michael. I'm not going out very much right now. And I certainly wasn't going out very much in the spring.

And so, you know, we're spending a lot of money on stuff that we might previously have spent on services. If you're not getting on airplanes and you're not eating out and you're not going to hotels, well, maybe you are buying groceries. Maybe you are buying board games. Maybe you are buying athletic equipment for your home workout because you're not going to the gym these days. And this spending on stuff translates into meaningful job growth.

Yeah. If you go back to the spring, auto manufacturers, for example, shut down almost completely in the spring because of fears of spreading of COVID. But they reopened pretty quickly and have ramped back up. They've gone gangbusters, frankly. People have been buying cars. I live here in Brooklyn. I don't know about you, but a lot of people in my neighborhood have bought cars because they don't want to get on the subway. That has led to a surge in demand for cars. And so there are auto manufacturing jobs out there. And then lots of other jobs for making and distributing and selling stuff.

So we're talking about manufacturing jobs, warehouse jobs, sales jobs. That's right, Michael. So Ben, what is our third data point here about the economy? So our third data point is home prices, that home prices have risen 5.7%, call it 6% over the last year. And that might sound, again, sort of initially pretty surprising. It does. But there are a couple of factors that are driving this. One is ultra low interest rates, right? The Federal Reserve back in the beginning of this crisis dropped interest rates practically to zero. That means that if you can borrow money

right now, you can do so extremely cheaply. Right. And that was done, of course, to try to get people to borrow money and spend it and get the economy moving again. Yeah, this was exactly what the Fed was trying to do, to get people out, engaging in economic activity, which very much includes buying houses. And of course, a lot of people were stuck at home, wanted a little bit more space for their suddenly homework and homeschool and home everything. Right. Especially if you were living in a city, maybe this was a good moment to go to the suburbs. Maybe this was a good moment to get out of a big metro area altogether. And so we've seen this play out differently in different parts of the country, but especially outside of downtown, you know, urban cities, we've seen a real increase in home prices and in-home sales.

I want to make sure I understand what that number means, 5.7% increase in home prices, because that does not mean that more houses are being sold or built, right? Just that houses that are selling, whatever that number is, they're just going for more. That is right, but it is also true that more houses are being bought and sold. And if there were more homes available, there would probably be even more activity. There's a lot of demand out there right now. So, Ben, it's pretty clear that a lot of what we are talking about here, this glass half full data, this relatively good news in the middle of a profound economic crisis, it reflects the spending power of those with means whose jobs have not been

deeply affected by this pandemic. Yeah, I think that's exactly right, Michael. This has been a pandemic that has fundamentally affected wealthier and less wealthy people in very, very different ways. So the housing market is a perfect example of that. If you were a white-collar professional during this, there's a pretty good chance that you held onto your job. You can get a loan, and therefore you can take advantage of these really good interest rates to go and buy a house

that maybe will bring you wealth over time. If you already own your home, then this price appreciation is helping you out. Maybe you even double down. You refinance, take advantage of both the better prices and the low interest rates and take some cash out, get some extra money in your pocket. Meanwhile, if you are a lower wage worker,

you're probably a renter, so you're not benefiting from that price appreciation. You probably can't afford to go out and buy a house and take advantage of those low interest rates. And that's assuming that you've held on to your job, which you very well may not have. Right. So these are all the ways in which the pandemic means that the well-off are in some ways just getting more well-off. While those who were struggling before the pandemic are left in an even worse position, which I think you'll see in some of the other data points that I brought you.

We'll be right back. Okay, so Ben, what is our fourth economic data point? From what you just said, this is the bad news half of this data. Yeah, not that I was that rosy during the good news portion. No, fair enough. So my fourth data point is negative 6.1%, which is the decline in consumer spending on services

since before the pandemic in January through September. So this is the flip side of the number that we talked about earlier about spending on goods, right? We've gone out and we've spent on stuff. We've done that because we haven't been spending on services. We haven't been going out to eat. We haven't been going to hotels or to concerts or to Broadway shows. And the service sector fell much harder than the goods sector during the worst of the shutdowns last spring, and it has rebounded much more slowly.

And there is a certain constraint on this kind of activity that is just built into the reality of life in a pandemic. Ben, to put what you just said into perspective, how big is the service economy in a pandemic. Ben, to put what you just said into perspective, how big is the service economy in the U.S., and how responsible is something like that 6.1% decline in consumer spending on services from January to September for the number of jobs that we haven't gained back?

I think you said earlier it was about 10 million. Yeah, so of that 10 million jobs that were still in the hole relative to before the pandemic, 9 million of that is in the service sector. Oh, wow. So very much a direct link between the decline in consumer spending and basically the joblessness we see in the country. Fundamentally, this recession is a service sector recession. That's particularly significant because fundamentally, ours is a service sector-based economy. You know, we've been talking about restaurants and hotels and air travel, but it's also retail and barbershops and entertainment. retail and barbershops and entertainment, you know, most of what you engaged with on a day-to-day basis before all of this happened was in the service sector. And a lot of that has been taken away from us during this period. And which demographics in our country, which groups of people have been most affected by this 10 million job loss in the service economy? Yeah, well, so that leads me perfectly to our fifth data point here,

which is five and a half million. And that's the number of women that have lost jobs during this pandemic. So earlier, we talked about the 10 million job hole. Right. Five and a half million of that is women, and it's disproportionately Black and Hispanic women. Because so many of the people who work in low-wage service sector jobs are Black and Hispanic women, immigrant women, and they have lost their jobs at an incredibly disproportionate rate. And at the same time, there's another huge

piece of this crisis, which is the child care crisis. Parents are trying to figure out how to take care of children who would normally be in school. And we know that that falls most heavily on women. And so not only are women losing a disproportionate share of the jobs, but many women are not even able to look for work right now because they're taking care of children or been unable to accept work because it would take them out of the home during hours when kids are meant to be in school. And so we get this sort of double whammy effect that is hitting women, and particularly lower-wage women who don't have the luxury of being able to work from home. So a recession that is deeply injurious to the service economy,

this service economy recession you mentioned is especially injurious to the women who are overrepresented in the service economy. In some ways, that feels very expected. That's right. And so if you remember what we were talking about earlier with the housing market and how that's disproportionately benefiting wealthier, higher income people, this is the flip side of that, right? The job losses have been concentrated in lower wage people. The effects in terms of kids being home from school have fallen disproportionately on people who don't have the means to pay for outside child care. And I think that this is yet another way that this particular crisis has exposed and widened the cracks that existed in our economy even before this.

And there's a real risk that there could be lasting damage that persists even after we come out of this period. And that actually leads to my sixth data point, which is 3.6 million. That's the number of long-term unemployed people in America right now. The number of people who have been unemployed out of work for more than six months at this point. And put that number, 3.6 million, into some kind of perspective. I know we're dealing with a lot of numbers at this point in the episode. Yeah, so this number has roughly tripled since before COVID. And it's rising really quickly.

So, you know, a lot of the numbers we've been talking about here, we've been kind of saying, well, it's getting better, but it's not getting better as quickly as we would like. This is a number that is getting worse. And, you know, this sort of six-month mark, on the one hand, may sound a little bit arbitrary, but there's been a lot of economic research over the years that has found that there is actually something meaningful there, that once people are out of work for that amount of time, it can make it really hard for them to get jobs again and to come back in to the labor force. Or if they do, that they may well be, you know, taking a major step backwards, earning less money at a lower

level of seniority. Maybe they're forced to change careers. And as a result, that extended period of time outside of a job can again have really lasting effects, even once the economy as a whole starts to recover. Right. So six months is the point at which economists think to themselves, this person, even if they do get another job, is never really going to recover the ground that they have lost. That's right. And so if you think way back to the beginning of this crisis, there was this idea that we could shut off the economy, kind of freeze everything in amber for just a brief period of time, and we could continue on as if nothing had happened. The longer that this goes on for, the further away that dream becomes, right? The more we do damage to the economy that can't just be reversed as soon as we get past the pandemic.

Well, I shudder to ask this question because there has been a lot of grim data here. But Ben, what is the final number that you have brought us, the seventh? So the final number is 12 million. And that is the number of people, at least according to one estimate, who will lose their unemployment benefits entirely at the end of the year. So, Michael, if you think back to the beginning of the pandemic, Congress took several actions to try to expand the unemployment system. Right. To reach people who are normally left out, freelancers and self-employed people, some part-time workers, right, to make sure that people who often don't get unemployment benefits are able to get them.

right, to make sure that people who often don't get unemployment benefits are able to get them. But that was a temporary expansion, and it's going to end at the end of the year if it's not extended. There were also efforts to extend benefits for longer. In most states, you get 26 weeks of benefits, and then you're out of luck. Congress added on to that. But those programs end at the end of the year, and there are a lot of people who will go from getting a few hundred dollars a week in unemployment benefits to zero essentially overnight. Wow. 12 million of them. And as horrible as what you're describing sounds, it is a very likely scenario, correct? Because Congress does not appear likely to take action before the end of the year. In fact,

before we have a new president sworn in in late January. Yeah, I mean, look, both Republican and Democratic leaders in Congress have said that they want to provide some sort of support, but we've been hearing that for months and it has not happened. The two sides seem to remain very, very far apart. And I think, you know, a lot of the assumption now is that we're not going to get anything before there's a new presidential administration, and maybe not even then. So at least for the time being, it looks like those 12 million workers are liable to be left on their own. Ben, if this is a service economy recession and the safety net, as you just said, is about to go away for 12 million Americans, many of whom work in that service economy, and we're now entering a new phase in the pandemic of restrictions across the country that will, above all, hurt the service economy. And Congress is not acting to spare all of these people before January.

How does this not end in financial disaster? So I don't think it has to, but it absolutely could. You know, we've talked a lot about all of the suffering that exists in the economy right now. But the truth is, it could be a lot worse. We have not seen some of the worst impacts, at least on a large scale, that we feared that we might last spring. And the reason for that, to a large degree, is because of what the federal government has done to aid households and businesses. But that aid is faded.

And if it is allowed to fade at a time when there is still so much damage to the economy, then that is when we will start to see those effects. That is when we will start to see evictions and foreclosures and long-term job loss, permanent business failures, hunger, right? The kind of severe lasting damage that we have not completely, but to a significant degree, avoided to this point. Right. The kind of damage that you don't really recover from, from which there's no V-shaped recovery, no economy frozen in amber that gets unfrozen and returns to normally. If the government

does not act, and if we enter this kind of cold winter of restrictions, and if people lose their jobs and lose those benefits, then you're talking about the kind of economic pain that some people will never come back from. That's what I fear. Well, Ben, I appreciate your time. Thank you. Thanks for having me. We'll be right back. Here's what else you need to know today.

After completing its largest clinical trial to date, Pfizer said that its coronavirus vaccine was 95% effective and had no serious side effects, an even better result than the early data it released two weeks ago. Pfizer says it will submit an application to the FDA for emergency approval to begin distributing its vaccine within days. And. No one is happy about this decision. We all, in fact, are feeling very sad about this decision because...

The New York City public school system, the largest in the U.S., will shut down in-person learning today after just eight weeks of classes. The move was automatically triggered once the city reached a 3% coronavirus positivity rate over a seven-day rolling average. The shutdown will disrupt the education of roughly 300,000 children who have been attending in-person classes and create major child care problems for their parents. Finally, the U.S. government said that Boeing's 737 MAX can resume flying nearly two years after the entire fleet was grounded over two deadly crashes blamed on the jet's faulty software. The path that led us to this point was long and grueling, but we said from the start that we would take the time necessary to get this right.

In a video message, the head of the Federal Aviation Administration, Steven Dixon, said he had personally flown the 737 MAX and was fully confident that it was now safe. I can tell you now that I am 100% comfortable with my family flying on it. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.