A Historic Unemployment Crisis

[0] From the New York Times, I'm Michael Bavarro.

[1] This is the daily.

[2] Today.

[3] To contain the pandemic, the U .S. government has deliberately shut down much of the economy.

[4] My colleague Jim Tankersley on the result, the worst unemployment crisis in U .S. history.

[5] It's Monday, April 6th.

[6] Good evening.

[7] This is the CBS evening news, Dan Rather, reporting.

[8] The newest government economic figures out.

[9] today show that the recession has not found its bottom.

[10] The last time that the United States set a record for new unemployment claims was the fall of 1982.

[11] President Reagan persists in remaining optimistic.

[12] Ronald Reagan is president.

[13] The country is engaged in a battle against inflation, the rapid increase in prices that has just beset the economy for years.

[14] And the Federal Reserve, as part of that battle, has made the cost of borrowing money really high.

[15] and as a result My fellow Americans in recent days all of us have been swamped by a sea of economic statistics some good, some bad and some just plain confusing tonight in homes across this country unemployment is the problem uppermost on many people's minds almost 700 ,000 people lose their jobs in the span of one week and file for unemployment that is a record we can do it I slowly but surely working our way back to prosperity that will mean jobs for all who are willing to work and fulfillment for all who still cherish the American dream.

[16] And it stays a record for a long time, stays through the next recession, even through the 2008 financial crisis.

[17] That remains the record, 1982, until this March 2020.

[18] The weekly unemployment numbers are in and they are the biggest ever by far.

[19] 3 ,283 ,000 Americans filed for unemployment last week.

[20] A health pandemic has become a financial pandemic.

[21] The third week of March of 2020, 3 .3 million Americans file for unemployment in one week.

[22] And that is the equivalent of the entire city of Chicago.

[23] That's a new record.

[24] And it lasts for exactly one week.

[25] The Labor Department is out with jaw -dropping new news.

[26] In the following week, the fourth week of March, 6 .6 million Americans file for unemployment, which means in the span of two weeks, nearly 10 million workers in America file for unemployment benefits.

[27] In fact, the past two weeks all but eliminated the jobs created in the past five years.

[28] What we hit in a single week in March this year was almost 10 times as bad as the worst week of 1982.

[29] 10 times.

[30] Jim, take us through the timeline of how we got to this staggering figure, 10 million people losing their jobs and needing unemployment benefits.

[31] So back in late January, as the virus is spreading rapidly through China and starting to really play havoc with supply chains there, there start to be warnings that this could really hurt the United States economy.

[32] But policymakers, particularly inside the white, White House are not raising huge alarm bells.

[33] So we have one person on the line.

[34] Okay.

[35] Welcome, everyone.

[36] And for those you're on the phone as well.

[37] The White House Council of Economic Advisors summoned a bunch of reporters for a briefing on February 18th.

[38] What's the biggest threat you see out there?

[39] And the acting chairman of the council, Thomas Philipson, who is a health economist, by the way, told, the reporters there, quote, Let's talk about what I don't think.

[40] I don't think Corona is as big a threat as people make it out to get.

[41] I don't think Corona is a big a threat as people make it out to be.

[42] So if you look at flu seasons in the U .S., it's about 40 ,000 deaths every year on average.

[43] In 2018, it was 80 ,000 deaths.

[44] In that same interview at the White House, we asked, well, if you're not worried about the risk of the virus, what risks are you worried about?

[45] And what's the biggest concern that you have?

[46] I don't think currently we don't have a lot of concerns.

[47] And the White House economist basically said nothing.

[48] We don't really think there's anything that could go wrong.

[49] Okay.

[50] Thank you very much.

[51] Thanks.

[52] And White House advisors would keep that lineup for, I don't know, almost a month.

[53] I was having calls with White House officials who were saying it's not going to be that bad.

[54] We're not going to need government intervention.

[55] The big risk right now is the stock market is freaking out.

[56] but we think we can get it under control.

[57] Tonight, elected officials taking unprecedented measures to keep people safe.

[58] And what happened once it became very clear that this couldn't be kept under control?

[59] What happened is basically unprecedented in American history.

[60] Industries started shutting down one by one, sector by sector, county by county, and that led to all these layoffs.

[61] Life is about to look very different.

[62] So let's start with New York City, where nightlife is over.

[63] The first workers to lose their jobs are exactly the ones you could see being hit by the restrictions that governments are putting in place.

[64] Here's the full list of businesses being forced to close at 3 o 'clock this afternoon.

[65] Dine in restaurants, cafes, coffee houses, bars, taverns, brew pubs, distilleries, clubs.

[66] Restaurants close and bartenders and wait staff lose their jobs.

[67] Governors order certain shops to close, most shops to close, and so retail workers lose their jobs.

[68] Movie theaters, indoor and outdoor performance venues, gymnasiums, fitness centers, recreation centers, indoor sports facilities, indoor exercise facilities, exercise studios, spas, and casinos.

[69] Also, it's things like tourism.

[70] No one's flying on airplanes anymore.

[71] So suddenly you see airline employees start to lose their jobs.

[72] If you work for a hotel in a destination, a resort, you are starting to lose your job.

[73] If you are someone who relies.

[74] upon one of those workers who's lost their job.

[75] So say you are a house cleaner in Florida who works for someone who's an executive at a resort and that executive loses their job.

[76] Suddenly they don't have money to pay a house cleaner anymore and you lose your job.

[77] It's these ripple effects and then they start getting into parts of the economy we might not necessarily expect.

[78] Daycare workers, preschool teachers, law firms, hospitals are serving coronavirus patients but they're not doing a lot of elective surgeries.

[79] So if you work in an elective surgery division, you're at risk or in some cases actually losing your job.

[80] All of these sectors are starting to lay people off, even the places you might least think are vulnerable suddenly are.

[81] So this becomes a kind of wave where people who are dependent on people who are dependent on people all end up getting squeezed and eventually are out of a job.

[82] Yeah, absolutely.

[83] And the wave is just going to keep going.

[84] We're going to see more and more people who can go to work or at least work from home who won't be able to because the revenue source that their business depends on is drying up.

[85] If you're a local newspaper and you depend on advertising from restaurants that can't be open, they're not going to advertise and so you are going to be stuck without any advertising and you're probably going to start laying off people, which we've already started to see.

[86] You know, Jim, one of the most defining qualities of this whole moment is how fast everything has moved and changed, how quickly our whole reality has shifted.

[87] And the same is true here.

[88] I mean, has there ever been an example of people's job security collapsing so quickly, not just the scale of it, but the speed of it?

[89] I mean, one day people own successful businesses.

[90] The next day, those businesses are closed.

[91] One day, I have a seemingly secure job, and the next day, I have been laid off.

[92] Yeah, we've never seen anything like this in modern America.

[93] Usually recessions spread kind of slowly.

[94] They take some time to work their way through various regions or various parts of the financial system or parts of the economy to the point where economists often debate whether or not we're in a recession well into the actual existence of the recession.

[95] But now, I mean, we're a couple of weeks into this one and no one disputes we're in a recession.

[96] It is so fast.

[97] You go to bed one week thinking the economy works one way and you wake up two weeks later and not only does your industry not have a job for you, your industry doesn't really work anymore for the time being.

[98] Wow.

[99] And then on top of how fast and severe that all is, you are left with this almost unimaginable before this thought, which is we're doing this on purpose.

[100] We are doing this because public health officials think the only way to survive a pandemic virus without losing hundreds of thousands or even millions of people to it is to turn the economy off and then eventually try to turn it all back on again.

[101] Right, this was the lesser of the awful possibilities that the U .S. had.

[102] Yes.

[103] We'll be right back.

[104] Jim, now that you've explained that we have 10 million Americans applying for these unemployment benefits, can you walk us through what the typical process of applying for that looks like and what someone would have gotten before this pandemic.

[105] So what happens is if you lose your job, you go to your state unemployment office and file a claim.

[106] You can often do that online.

[107] Sometimes you have to do it on a paper form, but you, depending on your state, get a benefit back that lasts about three months.

[108] It's meant to be a baseline, just something to tide you through.

[109] For example, if you're in California, it ranges between like $40 at a minimum per week to $450 at maximum.

[110] If you're in Pennsylvania, it's about half your weekly wage that you were earning before up to a maximum.

[111] And the way that the system is set up, you don't get as much as you would have made on your job, but you get something.

[112] It's supposed to be there as sort of an emergency safety net to keep you from getting evicted or going hungry before you find a new job.

[113] Got it.

[114] And is that still the case during this crisis?

[115] It's actually better during this crisis, thanks to the law that the president signed at the end of March, the CARES Act.

[116] Last night, as you know, the Senate passed important legislation.

[117] We're very proud of the product.

[118] What that includes, this was a big point of contention in the law, but that Democrats fought and got in.

[119] We did jujitsu on it, that it went from a corporate first proposal that the Republican put forth in the Senate to a workers' first, democratic workers' first legislation.

[120] It includes enhanced unemployment benefits.

[121] That means that whatever you were going to get from the state, you get still plus $600 a week.

[122] Wow.

[123] Yeah, it's a lot.

[124] It's a calculation meant to fill the gap between what you were earning before you were laid off and what you would have earned from unemployment.

[125] Every American worker who is laid off will have their salary remunerated by the federal government so they can pay their bills.

[126] It turned out to be too difficult for states to just calculate, okay, what was your wage?

[127] We're just going to give that to you.

[128] So instead, the lawmakers just figured out the average gap for the average worker between what they would have gotten at their job and what they would have gotten at unemployment.

[129] That turns out to be about $600.

[130] So if you are, for example, a bartender and you earn about $15 an hour on average, which is a little more than $30 ,000 a year, you're going to end up getting more money out of your new enhanced unemployment check than you would have just regularly at your job.

[131] If you are, say, someone who works at a small manufacturer who is laid off because there's no demand now for your products and you were earning a median salary in the country a little more than $60 ,000 a year, then you are going to get about the same back in your enhanced unemployment check.

[132] and if you're like a manager of an office or a store that's had to close and lays everyone off and you earned, you know, $100 ,000 a year, you're not going to be getting really anything close to your full salary back, but you still are going to be getting back more than you would have under the unemployment system.

[133] The idea is this does help you get by.

[134] It's just not going to fully fund the lifestyle you had before.

[135] And how long do these enhanced benefits last?

[136] Right now, Congress has them set up for four months.

[137] I think there's going to be a lot of pressure to continue that if the crisis continues and this chill in the economy persists past four months.

[138] Jim, and you're reporting, what has been the rationale for providing a level of unemployment benefit that is significantly greater than what states have traditionally offered in their unemployment benefits?

[139] The rationale is that this isn't a case where we are worried about dissuading people from looking for work.

[140] Usually, you don't want to give people in the eyes of many economists what's called a disincentive to work, too much money that will just keep them at home on the couch and not looking for a new job.

[141] But in this case, we don't actually want these people working.

[142] We want them to stay home.

[143] We want them to socially distance.

[144] We want them to be able to keep paying their rent and buying groceries and doing the things people need to do.

[145] But we have to make sure somehow that they get money to do that.

[146] So we've been talking about employees.

[147] How has the stimulus bill impacted or attempted to help employers?

[148] Well, the government is trying to keep as many of those businesses still going and not bankrupt as possible.

[149] It will keep companies intact.

[150] It's bailing out big corporations and it's offering loans to small businesses that can turn into grants if they use the money to keep employees on their payroll.

[151] But with our plan, since they stay on the payroll, of their employer, as soon as the crisis is over, they all can come back together.

[152] And this is actually an important point.

[153] It's probably almost certainly better for the government to subsidize employees staying on the payroll of their employer than to pay them unemployment benefits.

[154] Why?

[155] Well, we worry about what happens once we're through this crisis and we've got to start the economy back up.

[156] What we don't want to see are a bunch of people, left out of work and no easy way to get them back into jobs.

[157] One easy way to make sure they can get back to work is to keep them tethered to their employer in the first place.

[158] So you don't lose your job.

[159] You're basically just getting paid by the government not to work for your employer who you still work for.

[160] It's a little confusing, but it's really important.

[161] So it's a little bit like unemployment benefits, but instead of giving money to someone who loses their job, it kind of goes with the front door in order to keep that person from losing their job.

[162] Yeah, it helps the employee not have to look for a new job.

[163] It helps the employer not to have to hire for that job again.

[164] And because so many of them will be furloughed rather than fired.

[165] If they have benefits, they continue.

[166] If you're on the payroll of someone who offers health insurance, you keep that too, which is something that if you get laid off, you don't get to keep if you had employer health insurance.

[167] So there are a lot of benefits to it.

[168] And that means that company or small business can reassemble once this awful plague is over and our economy can get going quickly.

[169] Jim, when it comes to these unemployment benefits and this stimulus package that's meant to enhance that benefit and keep people from needing it in the first place, how much money is there and how many unemployed people can this system absorb?

[170] I mean, when you see something like 6 .6 million people applying for unemployment benefits in a single week, that makes me, and I'm sure many other people wonder how many people this system can handle.

[171] It may be a little crazy sounding, but the money is probably not the issue for the next couple of months.

[172] The issue is how many people can actually get benefits when they need them.

[173] The system is just not built to handle this amount of demand for.

[174] for new benefits.

[175] It's like funneling all of the traffic of New York onto a country road and trying to figure out how to get every car through.

[176] So some states we've already seen are having to tell people to sign up for benefits on different days of the week based on the first letter of their last name.

[177] What we're going to see, I think going forward is a lot more of that.

[178] We know it's a reason why some people who maybe would have signed up for benefits in the third week of March actually ended up signing up in the fourth week.

[179] And it's a reason the first week in April is probably going to have even higher numbers of new unemployed than the last week in March.

[180] So new records for a while, maybe, and all of that adds up to tens of millions of people out of work, which will absolutely strain budgets, state budgets, federal budgets, but the issue is going to be how long do lawmakers have the time and the patients and the money, in particular from the federal government, to keep funding that while we wait for the suppression measures here to work and the virus to go away.

[181] That is the great risk here is that we lose our nerve and lose the strategy and it's all for not.

[182] Jim, right now, everybody of course wants to know when this pandemic will be over and how we will know it's over.

[183] But I'm curious how we will know when this economic crisis is over.

[184] I think we're going to know the crisis is over when a critical mass of Americans feel safe going back to work, going out to eat, going back shopping.

[185] Every economist I talk to says this is a public health decision first and the economics will follow.

[186] Not just because we value human life so highly, which we do, but because if you don't have the confidence that if you leave the house, you're not very likely to get a deadly illness, you're not going to keep going through.

[187] the basic commerce that you did before.

[188] So once the infection rate drops, or, I mean, quite possibly, not until we actually have a workable vaccine, then we will start to see the real ramp up back to the economic activity we had before this pandemic hit.

[189] But the experts that I talk to say is that we were wrong to think about this as a tradeoff between human health and the economy.

[190] that they go hand in hand, that the more we are able to suppress the spread of the virus by suppressing the economy, the stronger the economy will emerge in the end.

[191] If we don't stick with this strategy, if we break out of it too early, if desperate people, the most vulnerable workers who need to eat are forced to go back out and try to do their jobs to earn, that living and they start infecting people again and infections and death rates spike some more, that's actually going to hurt the economy more than anything because it will undermine all of the confidence that people have left in the system for protecting them.

[192] So it's really this very delicate, probably very slow process of building that confidence, figuring out exactly who has the virus and where it's spreading and how it's moving through the population.

[193] And then we can start really brick -by -brick rebuilding this economy that was just shattered to pieces in the last few weeks.

[194] On that very sobering note, Jim, thank you very much.

[195] Thank you.

[196] We'll be right back.

[197] Here's what else you need to another day.

[198] The next week is going to be our Pearl Harbor moment.

[199] It's going to be our 9 -11 moment.

[200] It's going to be the hardest moment for many Americans in their entire life.

[201] In interviews on Sunday, top U .S. health officials, including the Surgeon General Jerome Adams on NBC, prepared Americans for staggering numbers of infections and deaths in the coming days, comparing it to the country's darkest days.

[202] Well, this is going to be a bad week.

[203] Unfortunately, if you look at the projection of the curves, of the kinetics of the curves.

[204] Speaking to CBS, Dr. Anthony Fauci said that at the moment, the crisis was beyond the government's control.

[205] I will not say we have it under control.

[206] That would be a false statement.

[207] We are struggling to get it under control.

[208] And that's the issue that's at hand right now.

[209] In Britain, Prime Minister Boris Johnson, who has tested positive for COVID -19, was admitted to the hospital after suffering symptoms for 10 days.

[210] and Queen Elizabeth made a rare televised address to the British people from Windsor Castle.

[211] While we have faced challenges before, this one is different.

[212] This time we join with all nations across the globe in a common endeavor, using the great advances of science and our instinctive compassion to heal.

[213] We will succeed, and that success will belong to every one of us.

[214] we should take comfort that while we may have more still to endure better days will return we will be with our friends again we will be with our families again we will meet again that's it for the daily I'm Michael Bobaro see you tomorrow