Gross domestic misery is rising
By Paul Krugman
Are you better off now than you were in July?
On the face of it, that shouldn’t even be a question. After all, stocks are up; the economy added more than a million jobs in “August” (I’ll explain the scare quotes in a minute); preliminary estimates suggest that gross domestic product is growing rapidly in the third quarter, which ends this month.
But the stock market isn’t the economy: more than half of all stocks are owned by only 1% of Americans, while the bottom half of the population owns only 0.7% of the market.
Jobs and GDP, by contrast, sort of are the economy. But they aren’t the economy’s point. What some economists and many politicians often forget is that economics isn’t fundamentally about data, it’s about people. I like data as much as, or probably more than, the next guy. But an economy’s success should be judged not by impersonal statistics, but by whether people’s lives are getting better.
And the simple fact is that over the past few weeks the lives of many Americans have gotten much worse.
Obviously this is true for the roughly 30,000 Americans who died of COVID-19 in August — for comparison, only 4,000 people died in the European Union, which has a larger population — plus the unknown but large number of our citizens who suffered long-term health damage.
And don’t look now, but the number of new coronavirus cases, which had been declining, seems to have plateaued; between Labor Day and school reopenings, there’s a pretty good chance that the virus situation is about to take another turn for the worse.
But things have already gotten worse for millions of families that lost most of their normal income as a result of the pandemic and still haven’t gotten it back. For the first few months of the pandemic depression many of these Americans were getting by thanks to emergency federal aid. But much of that aid was cut off at the end of July, and despite job gains we’re in the midst of a huge increase in national misery.
So let’s talk about that employment report.
One important thing to bear in mind about official monthly job statistics is that they’re based on surveys conducted during the second week of the month. That’s why I used scare quotes around “August”: What Friday’s report actually gave us was a snapshot of the state of the labor market around Aug. 12.
This may be important. Private data suggest a slowdown in job growth since late July. So the next employment report, which will be based on data collected this week — and will also be the last report before the election — will probably (not certainly) be weaker than the last.
In any case, that August report wasn’t great considering the context. In normal times a gain of 1.4 million jobs would be impressive, even if some of those jobs were a temporary blip associated with the census. But we’re still more than 11 million jobs down from where we were in February.
And the situation remains dire for the hardest-hit workers. The pandemic slump disproportionately hit workers in the leisure and hospitality sector — think restaurants — and employment in that sector is still down around 25%, while the unemployment rate for workers in the industry is still over 20%, more than four times what it was a year ago.
In part because of where the slump was concentrated, the unemployed tend to be Americans who were earning low wages even before the slump. And one disturbing fact about the August report was that average wages rose. No, that’s not a misprint: If the low-wage workers hit worst by the slump were being rehired, we’d expect average wages to fall, as they did during the snapback of May and June. Rising average wages at this point are a sign that those who really need jobs aren’t getting them.
So the economy is still bypassing those who need a recovery most.
Yet most of the safety net that temporarily sustained the economic victims of the coronavirus has been torn down.
The CARES Act, enacted in March, gave the unemployed an extra $600 a week in benefits. This supplement played a crucial role in limiting extreme hardship; poverty may even have gone down.
But the supplement ended on July 31, and all indications are that Republicans in the Senate will do nothing to restore aid before the election. President Donald Trump’s attempt to implement a $300 per week supplement by executive action will fail to reach many and prove inadequate even for those who get it. Families may have scraped by for a few weeks on saved money, but things are about to get very hard for millions.
The bottom line here is that before you cite economic statistics, you want to think about what they mean for people and their lives. The data aren’t meaningless: A million jobs gained is better than a million jobs lost, and growing GDP is better than shrinking GDP. But there is often a disconnect between the headline numbers and the reality of American life, and that is especially true right now.
The fact is that this economy just isn’t working for many Americans, who are facing hard times that — thanks to political decisions by Trump and his allies — are just getting harder.