Unemployment Isn't Nearly As Bad As It Looks
Yesterday's employment report for April showed 20.5 million jobs lost and an unemployment rate of 14.7%. This is its worst since the Great Depression. It was at a 50-year low of 3.5% just two months ago.
Awful, yes, but only half as bad as it looks for the economy.
Why? Because roughly half of American workers can earn more from unemployment benefits than they earned at their jobs prior to the coronavirus shutdown, according to Eric Morath at the Wall Street Journal. On top of state unemployment, federal coronavirus stimulus is adding $600 per week.
With my sister, I co-own Red Frog Coffee in Longmont, Colorado. We applied for and were approved to receive a modest Paycheck Protection Program loan that will help us slowly restart operations while enforcing mitigation measures. When my sister reached out to employees to make the return-to-work schedule for this month, half of the staff said they did not want to return to work until their unemployment benefits ran out at the end of July. One employee claims to be making $3,000 per month, far more than he made from salary and tips. Many small businesses report similar situations.
Employees making this rational choice will keep the unemployment figure high, which looks bad, but they are not suffering what unemployed people usually suffer. Their temporarily higher incomes improve their financial lives, which will prove beneficial to the economy as it struggles to its feet.
Among the half of America’s unemployed workers who are not making more than they made at work, many will return to their jobs this month or next as the economy reopens. They did not “lose” their jobs during the shutdown any more than they lose them each weekend during normal times. When the planned closure is over, they will return to work.
One could look at the job losses a different way.
Instead of saying, “What? Twenty million people lost their jobs last month?” we could say, “Wow! Ten million people are making more staying home than they made at work, and the other 10 million should be back to work soon.”
Add in extra stimulus, such as the $1,200 payments from the IRS to individuals with an adjusted gross income of less than $75,000, and it’s easy to conclude that economic damage is not nearly as high as the unemployment figure would lead us to believe.
This is not normal unemployment. It is temporary, and for half of those affected it is a financial boost, not burden.