Today, Explained - 6.6 million more unemployed

Episode Date: April 2, 2020

Last week's unemployment numbers shattered all records. This week, they doubled. Vox's Matthew Yglesias, host of The Weeds podcast, proposes a way out of this mess. (Transcript here.) Learn more about your ad choices. Visit podcastchoices.com/adchoices

It's Thursday, April 2nd, 2020, and this month is already looking like it's going to be tougher than March. I'm Sean Ramos from, and this is your coronavirus update from Today Explained. Today we got news that 6.6 million Americans filed for unemployment last week. That brings the total number to 10 million Americans who have lost their jobs in just the last two weeks. Much more detail on that in today's episode. The loss of jobs in America also means the loss of health insurance. According to an analysis of state and federal data from the Economic Policy Institute, roughly 3.5 million Americans likely lost their health insurance in the past two weeks. And that's, of course, scary because

not only are we in the middle of a global pandemic, but the United States has the most cases of COVID-19 in the world, something like 250,000. We have doubled the number of confirmed cases in Italy. In better news, Florida is finally taking this seriously. The governor there ordered residents to stay at home on Wednesday shortly after the number of confirmed COVID-19 cases there jumped by more than 1,000 in a single 24-hour period. Florida now has over 8,000 confirmed cases. Nearly 40 of these United States have now issued stay-at-home notices. Texas is the biggest holdout. There are about 4,000 confirmed COVID-19 cases there. Meanwhile, in New York, where this is still just the worst, the state could run out of ventilators in six days. According

to the New York Times, the state has close to 100,000 confirmed cases, 13,000 or so have been hospitalized, and over 3,000 are in intensive care. The governor there says that buying more ventilators has been tough with so much competition around the country and the world. Without them, doctors will be left making some very tough decisions. From tough decisions to a good one, the Democratic National Convention has been postponed. It was going to be July in Milwaukee, now maybe August. Remember the Joe and Bernie show? I don't. You are emailing us coronavirus questions to todayexplained at vox.com. Trust me that we see you even if we don't get to reply.

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with iGaming Ontario. Matthew Iglesias, I get a lot of push notifications about this crisis that we're in, and they seldom scare me, but today I got a few of push notifications about this crisis that we're in, and they seldom scare me. But today I got a few that made me feel fear for this country. We got some shocking numbers. What were they? So initial unemployment claims for the week that ended on March 28th came out, and it was off the charts, insane. 6.6 million new people filed for unemployment benefits. That was double what we saw in the previous week. And that previous week was itself a record. These newest numbers, they are 10

times the biggest figure that we've seen outside of the context of March 2020. So a situation that looked incredibly bad a week ago is getting worse at a really frightening pace. So these are historic numbers just one week after we got historic numbers, and this historic number is exponentially bigger than that last one? Yeah, I mean, we've had, if you take these at face value, 10 million job losses over two weeks in March. That's equivalent to the first six months of the Great Recession, just packed into a single two-week period. We have had high unemployment in the past, but we have never had this kind of incredibly rapid increase. And of course, you see it. I mean, if you walk around in D.C. for approved recreational activities, you see like tons of stores are closed, which, you know, we know it's what people

have been putting out there. But it means that people are losing their jobs. They're losing them really, really, really fast. And we've never seen anything remotely like this in past recessions. Now you pay attention to numbers like these. Most people are just trying to figure out how to live their lives in this moment. Did people expect this huge jump in the unemployment numbers just from the historic numbers we got last week? You know, people expected a big number. They tried to use some inferences based on Google searches and state-level data. And what I was ready for last night, you know, I was getting ready to cover this story Thursday morning, and I was prepared for maybe 5 million initial claims, which would have been crazy. That would have been an all-time record. I was expecting the worst figures ever, and we got something worse than what I was expecting. And the exact same thing happened the previous week. We had been looking at an estimate from Goldman Sachs that said there might be 2.25 million

initial claims. That's really bad. That would be much worse than anything that happened before. Instead, we got over three million. So people are expecting extremely rapid deterioration in the economy, and it keeps deteriorating faster than we expect. Is part of the issue here that the counts that we're getting aren't the full picture? Is that what's going on? So it's going to get worse every week as the picture becomes clearer? I mean, that's an alarming possibility here. Reports you hear anecdotes are that phone lines at state unemployment offices have been jammed, websites have crashed. So it is very possible that there are hundreds of thousands of people who have been

trying to file claims but haven't succeeded in doing so yet, and that we're going to see those numbers come online in the next week or two. The other thing to keep in mind is that, you know, March 28th was not that long ago, but in coronavirus crisis terms, like, every day is like a lifetime. And a lot of large southern states, Florida and Georgia in particular, only adopted new shutdown measures after that window closed. So there's plenty of more places for this economic tidal wave to hit once we get next week's data. And then the thing you really have to worry about is secondary and tertiary consequences. Because we assume that we're looking right now at people who've lost their jobs because their businesses shut down specifically because of the virus. But then when people lose their jobs, they have less money. When people hear these terrifying headlines about job losses, they spend less money. So lots of companies that are still operating, right? You can go online, and you can buy all kinds of durable goods, right? Like you could order a chair, you could order a

computer, you could get a suit made by whatever custom fabricators, like there's a lot of stuff for sale that has not been impacted by the virus. But if millions of people lose their jobs, they're not going to buy furniture, They're not going to buy computers. And we're going to see more companies start to get hurt. And, you know, sort of a recession that builds on itself totally separately from the public health crisis we're looking at. So last week's numbers were 3 million and people were shocked. This week's numbers are 6 million and we are even more shocked. Should we be bracing for 12 million next week? I mean, and how long does this continue? I don't think we will see

that kind of growth pattern. Because of the virus, we've gotten used to thinking in exponential terms. The labor market normally doesn't work like that, but we could see easily another number in the millions, which we'd never had before March, right? So even if this slows, even if it slows substantially, we're still going to be looking at a velocity that we have no experience with. And we're still going to have the question of, are people even successfully getting through in these systems? It's crazy to me that Congress has gone out of town until April 20th. You think about, like, where are we going to be six or seven weeks from now? Like, what's going to be left? And it's a mind-boggling, right? I mean, you think, okay, like, we will find a bottom

somewhere. But the economy doesn't necessarily work like that. The more people who lose their jobs, the more at risk everybody else is. We all know restaurants in our communities or people who work in food service who've lost their jobs. We also know other people who are hanging on, trying to do curbside takeout, trying to do delivery. And, you know, good for them. God bless. But if so many people lose their jobs that they can't afford takeout meals or just splurge like that, we're going to see more shutdowns even in that industry.

We're seeing the advertising market in the industry we work in looking pretty scary. Unless we can do something to actually put a floor under the economy, it can keep falling and falling and falling for a really long time. My name is Ben Kovari. I was an IT project manager for an office space company in New York City, and I was laid off along with about 40% of our staff at the end of last week. I logged on to the unemployment website to try and file immediately for unemployment, but I found out that the date that you have to file for unemployment in New York is based upon the first letter of your last name. I assume that was because they are inundated with calls because of the current crisis.

Once I completed the application, I had to call in to complete and confirm all of my info. So I got the phone number from the website and I called in. One in about 10 calls that I placed to the unemployment office actually connected and got me to the menu. The other 90% of the dials that I placed resulted in either immediate call failure or an error message from Verizon telling me my call could not be completed. So I probably called about several hundred times over the course of a couple of days. When you did get through to a menu, you had to enter your social security number and a PIN number that you created online. However, once you completed the social security number and PIN,

you got an automatic recording that said, we are experiencing a high call volume, please call back this week. And then it just disconnected. So the only thing to do was to redial. And of course, with only one in 10 calls even getting through to the menu, it's a timely process to try and get through. So I kept dialing and dialing and I kept filling out my social security number, my PIN number, and just resulting every time in the same, we are experiencing high call volume, please call back this week. Disconnect. One time I got lucky. I entered my social security number, my PIN number, and instead of getting disconnected on, I got a new message that said,

thank you for calling. Your estimated wait time is 40 to 45 minutes. And then I was put on hold, something that had never happened before. So I sat on hold. And when I reached about 40 to 42 minutes on hold, it disconnected. That was obviously extremely frustrating.

And I was ready to throw my phone out the window at that point. So I was talking to throw my phone out the window at that point. So I was talking to a friend of mine who was also let go from my company. There's a bunch of us actually on an alumni Slack channel. There are people who have called over a thousand times and have not been able to get through to a human being yet. So I was talking to one friend of mine, and I told him that I got through to be on hold, and then I got disconnected. A little bit later in the day, he called me, and when I picked up, he had gotten through, and he then asked the representative if he could conference in his friend, i.e. myself,

to complete my application. And to my surprise, she said yes. So my friend conferenced me into his existing call with a representative from the New York State Unemployment Office. And she was okay with it. She let me go through the process of confirming my information. She gave me a warning that my friend who was still conferenced in on the phone was going to be able to hear my social security number and personal information. I said I didn't mind. And she was able to complete my application. And it saved me an immense amount of time. You know, kudos to that individual who was working and understood the trouble that a lot of people are going through right now. It was a pretty terrible process trying to get through. You have to understand the strain that the system is under with millions of people

in the same boat that I am in, unfortunately. So I try to temper my temper, for lack of a better term. But it's extremely frustrating. You know, I've seen screenshots again in that alumni Slack channel of people, you know, posting pictures of their recent call history. And it's the unemployment office filling up the entire screen with hundreds and thousands of calls. So I'm extremely fortunate that I didn't quite make it to four digits. I was only in the triple digits number of calls. But I can't even imagine what it's been like for a lot of other people who have, you know, been stuck at home, you know, under a quarantine, having nothing to do but hoping to get lucky and

reach a person at the unemployment office. Congress is out of the office right now, but luckily, Matthew Iglesias has a plan to get us out of this mess, and he'll share it with you for free after the break. I'm Sean Ramos-Furham, and this is Today Explained. Support for Today Explained comes from Ramp. Ramp is the corporate card and spend management software designed to help you save time and put money back in your pocket ramp says they give finance teams unprecedented control and insight into company spend with ramp you're able to issue cards to every employee with limits and restrictions and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250 when you join Ramp. You can go to ramp.com slash explained.

Ramp.com slash explained. R-A-M-P.com slash explained. Cards issued by Sutton Bank. Member FDIC. Terms and conditions apply. Matthew, you wrote a piece recently that said that we as a country need a wartime-style mobilization to get out of this crisis. Last week, Congress passed its big phase three stimulus package, $2 trillion, unprecedented in the modern era. Is that the kind of mobilization you're talking about? It's good that they did that, but it's not nearly good enough. So they passed that bill. The stock market went up in response. A number of other indicators, the bond market, inflation expectations, all showed progress as a result of that bill.

Unfortunately, Congress brain is like they did a big thing, the response to it was positive, and then they left town for a series of weeks. But if you look at all of those indicators that were positive, they didn't get us back to where we want to be with stocks, with interest rates, with inflation expectations. So the real lesson they should have taken from the success of that 2 trillion package is they ought to try another 2 trillion and see where we are. Maybe 2 trillion more, 2 trillion the success of that $2 trillion package is they ought to try another $2 trillion and see where we are. Maybe $2 trillion more, $2 trillion on top of that. Like, when you're working on a problem of large but unknown scope, you got to keep trying, and then you got to look and you got to reassess. And that's not what they did.

So you drew up a vision for Congress because they're not doing their jobs right now. What do you think they should be doing? Yeah, so I mean, I think there's three buckets of activity that Congress needs to look at. One is just putting money into people's hands so that they have cash to spend. Even more money. Yes. The second is looking at mobilizing industries that do relevant things. That's the ventilators that we've talked about a lot.

It's the N95 respirators and other personal protective equipment that healthcare professionals need. But it's also stuff that regular people could use. You know, things like disposable surgical masks, gloves, hand sanitizer, Lysol wipes, all kinds of things where if you go online or you go to your store,

you're gonna see shortages right now of those things. We could be and need to be producing more, and the government should be leading that effort. The last thing is supporting state and local governments financially, because we are at a big risk of seeing a sort of secondary and tertiary economic collapse as state governments need to start laying people off and cutting services. Okay, well, let's go through the three of them, starting with just putting more money in people's hands. Now, Congress just did that, and they did it in a historic way, but you're saying that's not enough? They need to do more of it? Yeah, I mean, $1,200 checks is nice, and the unemployment benefits to people who've lost their jobs is very important. But, you know, people could use more money. There are lots of goods and services that remain for sale

today. You can get food delivered to your house. You can get takeout. You can buy different things at the grocery store. You can order a new computer. You can make a remote appointment with a therapist. You can do a telemedicine consultation with a doctor who doesn't specialize in coronavirus. You could subscribe to extra streaming services, right? And a lot of the discourse around this has been dominated by experts, which is good, but people who are in relatively privileged positions in life, and their sort of main personal experience of the economic situation is, oh, I might like to go out to eat with my friends, but I can't because of

social distancing. But you kind of think about typical people who are just cash constrained all the time in their ability to get takeout food, in their ability to just buy durable goods for the house. And if we have more money in more people's hands, those industries that are still functioning can function better, as opposed to a situation where everybody gets poorer and then nobody can buy things. And then industries that aren't impacted by the crisis

start to collapse. Well, let's talk about those empty shelves and the things people really want. I haven't seen toilet paper at the grocery store I go to in weeks. Luckily, I have a stash because Terry next door invited us to Costco once last September. What could the government do to fix this? So right now, we have a lot of government efforts to prevent price gouging, right? Because we're trying to manage shortages. And that's good. I

mean, you don't want to see shortages managed poorly. But you would really like to see is addressing the shortages. And that means identifying key commodities, I would say hand sanitizers, surgical style masks, gloves, disinfecting wipes, other things like that, and say, look, we are going to guarantee purchase at a slightly elevated price. Not like a crazy 7,000% markup, but yeah, you can get 15% higher prices than you normally would for hand sanitizer, and the government will buy it if you can't sell it to stores. And that is what gives companies the incentive to run the factory 24 hours a day, right, to actually increase production. Because the problem with doing everything on a price control basis is that

ramping up is expensive. We've got a number of stories, I've seen them locally and nationally, of distilleries, you know, places that make booze, saying we're going to make hand sanitizer, because you use alcohol in both cocktails and cleaning equipment. But often what they're doing is sort of a stunt where they're making it and they're giving it away, which is great. It's a great charitable endeavor. But to really go on a large scale, you need to mobilize greed and the profit motive. You need people to be saying, yes, I am going to undertake the expense of retooling my distillery to make hand sanitizer. I am going to hire some of the people who have recently lost their jobs to work extra shifts so that we can make more of

this sanitizer. And to do that, you do need to offer a premium over regular prices, but then it can be okay because the government can pay the premium, right? Instead of talking about protecting people from price increases, we should just be spending the money to get what it takes. It feels like we've been talking about initiatives the federal government could take thus far, but your third point was that we need to bolster state and local governments to help them help people too, I imagine? Yeah, absolutely. Because right now you are looking at a real crisis in state and local government finances. A lot of state and local governments rely very heavily on retail sales taxes. Most of them put extra sort of taxes on restaurant meals or an alcohol that's sold,

which makes a lot of sense for sort of tax theory reasons, but it means their revenue is getting hammered. At the same time, they have additional expenses, right? Governments that are trying to do the right thing are trying to deliver food to kids who normally get school meals. They have police officers working extra shifts in hazardous conditions. They are trying to disinfect their buses and their metros. They're doing stuff like that. But really soon, they're going to hit the wall, and they're going to have to start furloughing workers or laying people off. We saw this during the Great Recession of 2008-2009, where the federal government did a trillion dollars in stimulus. But more than 100% of that was offset by state

and local governments doing cutbacks. New York, we know, is in this incredible emergency right now. And earlier this week, they passed a budget that's going to cut Medicaid because they have no choice. Only the federal government operates free of budget constraint and can just sort of hand out huge buckets of cash to state and local governments so they can keep providing essential services. So the federal government right now needs to shore up people, needs to shore up business, needs to shore up state and local governments. It basically needs to shore up everything. Can we afford to engage in a stimulus at this level? I mean, I'm sure Congress passed the $2 trillion thing and said like, well, we've never done something like that before. Let's go back to our families and practice safe social distancing or whatever. Was that a terrible mistake? I mean, I think you have to ask,

can we afford to not do this stuff? Can we afford to not mobilize fully? Can we afford to have healthy, able-bodied people sitting at home, losing income, becoming depressed when they could be making things that are useful to fighting this virus. And, you know, I use the analogy of wartime, which a lot of people have thrown around sort of loosely, but I think we should take fairly literally. During World War II, the Federal Reserve and other central banks around the world, it coordinated very directly with the Treasury to essentially print money and cover the costs of things to ensure that if we lost a battle, it would be because we didn't have enough tanks or we didn't have enough planes, not because we didn't have enough money, right? What matters

in a wartime mobilization is what are the actual resources of your country. We are not out of textile factories. We are not out of distilleries. We are not out of people who are capable of working in those places. It does seem like we are out of ventilators and N95 respirators, and we need to do the work to increase our capacity to produce those things. But in all of these cases, it's the real resources that matter more than money. And we need a central bank that is willing to say that. The Fed has done a lot of stuff, dramatic kinds of things, basically to make sure that anybody who wants a loan can get one at a cheap interest rate. And that's fantastic. But they need to say really clearly that it does

not matter how much debt the federal government takes on. They will provide that infinite backstop until this crisis is passed. And I guess just to be clear to people, how do we get the money to pay money out of thin air and use it to purchase bonds and those bonds finance the federal government. So that's what they're doing. That's correct. That's the appropriate thing to do. What I'm calling for is a clear statement from the Fed that says it doesn't matter how much Congress spends, that if they go to $4 trillion, if they go to $10 trillion, whatever they want to do, the Fed will buy up all those bonds, right, so that there is a guarantee that they will be able to sell them that there will be a market and in essence they would be quote-unquote printing money they don't actually print anything it's just all done on computers uh but you know pure financial constraints should not be what limits us here is it fair to say what you're talking about is is sort of printing money against faith in the United States?

Yeah, I mean, again, you know, you look at something like I was taking my son to an old Civil War battlefield because I was trying to find someplace that would be empty. And one thing that happened there is the Confederate government, they printed money to finance their war effort. And it was fine until it became clear that they were going to lose. At that point, their money lost all value. If people think that the virus is going to crush the American economy and American society, then our money will become worthless. But printing too much is not going to do that, as long as we have confidence that we are going to beat this thing. And I fully believe that we can. I mean, we have the scientific resources. We have the production resources. What we need is to actually do the work, just as we have in other moments of great national crisis. Worst case scenario, if we look back two years from now and we say the really bad thing that happened in the fall and winter of 2020

is that prices went up four or 5% because we printed too much, that would be an incredible success story, right? What we are worried about now is large scale deaths and mass unemployment. If we can avoid those fates at the cost of a little bit of inflation, that would be an incredible success. Right now, though, we're looking at both, and it's terrifying.