Chart of the day

To read the mainstream press, you’d think that the U.S. economy—especially the economy from the standpoint of workers—is on the mend.

The New York Times is a good example:

The American economy gained 1.8 million jobs last month, even as the coronavirus surged in many parts of the country and newly reintroduced restrictions caused some businesses to close for a second time.

And, it’s true, both the official (U-3) unemployment rate (the orange line in the chart) and the more inclusive (U-6) rate (the green line) have fallen since April. But, at 10.2 and 16.5 percent, respectively, they’re still at or just below what they were during the worst period of the Second Great Depression.

Moreover the percentage of American workers who have been unemployed for 15 weeks or more is on the rise—and can be expected to continue to grow in the months ahead.

The massive Reserve Army of unemployed, long-term unemployed, discouraged, and underemployed workers is serving to discipline and punish workers, both those who have managed to keep their jobs and those who have lost them.

We know this because workers’ pay is going down. At the same time, workers are forced to have the freedom to commute to and labor at their jobs under perilous pandemic conditions, they’re being paid less. According to the Bureau of Labor Statistics, both the average hourly and weekly earnings for production and nonsupervisory workers fell between June and July of this year.*

Meanwhile, now that emergency federal benefits have expired, the unemployed—both continuing cases and newly laid-off workers—will not be receiving the $600-a-week supplement that helped them pay their bills through the spring and early summer.

Instead of raising workers’ wages, to mitigate the effects of the pandemic and to attract them back to work, employers and their political representatives prefer to slash unemployment benefits in order to compel workers to compete for the few jobs that are currently available.

Whichever way you look at it, American workers are the ones who are being forced to shoulder the lion’s share of the costs created by the COVID economic crisis.

*These numbers relate to production employees in mining and logging and manufacturing, construction employees, and nonsupervisory employees in the service-providing industries. These groups account for approximately four-fifths of the total employment on private nonfarm payrolls.

Chart of the day

Since the first of June,
Lost my job and lost my room.
I pretend to try,
Even though I tried alone.

— Sufian Stevens, “Flint (For the Unemployed and Underpaid)”

Yesterday morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.3 million American workers filed initial claims for unemployment compensation. That’s on top of the 48.7 million workers who were laid off during the preceding fifteen weeks.

Here is a breakdown of each week:

• week ending on 21 March—3.31 million

• week ending on 28 March—6.87 million

• week ending on 4 April—6.62 million

• week ending on 11 April—5.24 million

• week ending on 18 April—4.44 million

• week ending on 25 April—3.87 million

• week ending on 2 May—3.18 million

• week ending on 9 May—2.69 million

• week ending on 16 May—2.45 million

• week ending on 23 May—2.12 million

• week ending on 30 May—1.90 million

• week ending on 6 June—1.57 million

• week ending on 13 June—1.54 million

• week ending on 20 June—1.48 million

• week ending on 27 June—1.41 million

• week ending on 4 July—1.31 million

All told, 50 million American workers have filed initial unemployment claims during the past sixteen weeks.

To put that into some kind of perspective, I produced a chart comparing the cumulative totals of the initial unemployment claims for the current pandemic compared to two other relevant periods: the worst point of the Second Great Depression (from the middle of January to early May 2009) and the weeks immediately preceding the current depression (from the end of November 2019 to mid-March 2020).

As readers can see in the chart above, the difference is stunning: 10.2 million workers filed initial claims during the worst 16-week period of 2009, 3.5 million from early December to mid-March of this year, and 50 million in the past sixteen weeks.

According to the most recent report from the Bureau of Labor Statistics, the number of unemployed workers actually fell by 3.2 million to 17.8 million in June, leading to an official unemployment rate of 11.1 percent—although, the surveys on which those data are based only capture those who were unemployed in mid-June, before the new wave of business shutdowns and layoffs.

Moreover, even as the protests ignited a national uprising against racism in the aftermath of the police killing of George Floyd and others, African Americans have experienced the slowest recovery of all racial groups. While the official black unemployment rate in June fell (to 15.4 percent), it is still much higher than the white rate (10.1 percent) and higher even than the Hispanic rate (14.5 percent).

On top of that, we should add in the workers who are involuntarily working part-time jobs—in other words, workers who would like to have full-time jobs but have been forced “for economic reasons” to accept fewer hours—and discouraged workers—Americans who are able to work but have given up looking for a job. The reserve army of unemployed and underemployed workers then rises to something on the order of 30 million Americans.

In the meantime, the United States continues to set daily records for new confirmed COVID-19 cases. Yesterday, there were 178 new cases per million people in the United States compared to 27.6 cases for the world as a whole.

We can therefore expect to see new waves of business closures, which in turn will mean more American workers furloughed and laid off, and therefore a steady stream of initial unemployment claims.

The only possible conclusion to draw is that, unless there’s a radical change in the U.S. response, the existing economic and social disaster in the United States will continue to worsen in the weeks and months ahead.

Chart of the day

I’ve got those unemployment compensation
“Please fill out an application” blues.
I’ve got those “How much money did you earn?
Stand in line and wait your turn” blues.

They make me feel I’m committing a sin
Just to get back a little piece of what I put in.
I’ve got those “Have you had an interview?
Come back in a week or two” blues.

— Barbara Dane, “Unemployment Compensation Blues”

Yesterday morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.4 million American workers filed initial claims for unemployment compensation. That’s on top of the 47.3 million workers who were laid off during the preceding fourteen weeks.

Here is a breakdown of each week:

• week ending on 21 March—3.31 million

• week ending on 28 March—6.87 million

• week ending on 4 April—6.62 million

• week ending on 11 April—5.24 million

• week ending on 18 April—4.44 million

• week ending on 25 April—3.87 million

• week ending on 2 May—3.18 million

• week ending on 9 May—2.69 million

• week ending on 16 May—2.45 million

• week ending on 23 May—2.12 million

• week ending on 30 May—1.90 million

• week ending on 6 June—1.57 million

• week ending on 13 June—1.54 million

• week ending on 20 June—1.48 million

• week ending on 27 June—1.38 million

All told, 48.68 million American workers have filed initial unemployment claims during the past fifteen weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 15-week periods: the worst point of the Second Great Depression (from the end of January to early May 2009) and the weeks immediately preceding the current depression (from early December 2019 to mid-March 2020).

As readers can see in the chart above, the difference is stunning: 9.6 million workers filed initial claims during the worst 15-week period of 2009, 3.3 million from early December to mid-March of this year, and 48.7 million in the past fifteen weeks.

According to the most recent report from the Bureau of Labor Statistics, the number of unemployed workers actually fell by 3.2 million to 17.8 million in June, leading to an official unemployment rate of 11.1 percent—although, the surveys on which those data are based only capture those who were unemployed in mid-June, before the new wave of business shutdowns and layoffs.*

Moreover, even as the protests ignited a national reawakening on racism in the aftermath of the police killing of George Floyd and others, African Americans have experienced the slowest recovery of all racial groups. While the black unemployment rate in June fell (to 15.4 percent), it is still much higher than the white rate (10.1 percent) and higher even than the Hispanic rate (14.5 percent).

On top of that, we should add in the workers who are involuntarily working part-time jobs—in other words, workers who would like to have full-time jobs but have been forced “for economic reasons” to accept fewer hours—and discouraged workers—Americans who are able to work but have given up looking for a job. The reserve army of unemployed and underemployed workers then rises to more than 27.8 million Americans.

Moreover, as I argued recently, millions of other unemployed workers are not included in this number:

In addition to first-time job-seekers who have unable to find a job (some unknown portion of an estimated 3.8 million high-school graduates, 1 million who graduated with associate’s degrees, and 2 million with bachelor’s degrees), it doesn’t include any of the estimated 8 million undocumented workers who have lost their jobs.

Meanwhile, employers and the White House (including Labor Secretary Eugene Scalia) are continuing to clamor for businesses to be allowed the freedom to reopen. But they’re worried unemployed workers, who have received supplemental benefits as a result of the CARES act, will not want to return to work under conditions that raise risk of becoming infected with the virus. So, they’ve announced both that the extra $600 “disincentive” for people to return to work will be allowed to expire at the end of July and that any workers who refuse to be called back to work will lose their unemployment benefits.

Their only plan, in the midst of the growing pandemic, is to turn the screws and force more and more American workers—black, brown, and white—to have the freedom to sell their ability to work to someone else.

 

*Yesterday, the United States set another record for new coronavirus cases. A day after surpassing 50 thousand for the first time, the total hit 55,220. On Wednesday, there were 52,788 new cases.

 

Chart of the day

Hot soup on a campfire under the bridge
Shelter line stretchin’ ’round the corner
Welcome to the new world order
Families sleepin’ in their cars in the Southwest
No home no job no peace no rest

— Bruce Springsteen, “The Ghost of Tom Joad”

Yesterday morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.5 million American workers filed initial claims for unemployment compensation. That’s on top of the 45.7 million workers who were laid off during the preceding thirteen weeks.

Here is a breakdown of each week:

• week ending on 21 March—3.31 million

• week ending on 28 March—6.87 million

• week ending on 4 April—6.62 million

• week ending on 11 April—5.24 million

• week ending on 18 April—4.44 million

• week ending on 25 April—3.87 million

• week ending on 2 May—3.18 million

• week ending on 9 May—2.69 million

• week ending on 16 May—2.45 million

• week ending on 23 May—2.12 million

• week ending on 30 May—1.90 million

• week ending on 6 June—1.57 million

• week ending on 13 June—1.54 million

• week ending on 20 June—1.48

All told, 47.25 million American workers have filed initial unemployment claims during the past fourteen weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 14-week periods: the worst point of the Second Great Depression (from the end of January to the beginning of May 2009) and the weeks immediately preceding the current depression (from mid-December 2019 to mid-March 2020).

As readers can see in the chart above, the difference is stunning: 9 million workers filed initial claims during the worst 14-week period of 2009, 3.1 million from mid-December to mid-March of this year, and 45.7 million in the past fourteen weeks.

Once again, keep in mind, the most recent numbers still don’t include perhaps millions of other American workers, since many states are still addressing backlogs of claims. Masses of workers have been unsuccessful in applying for unemployment insurance because state websites and phone lines are inundated and still, even now, not working correctly.

According to the most recent report from the Bureau of Labor Statistics, the number of unemployed workers fell by 2.1 million to 21.0 million in May, leading to an official unemployment rate of 13.3 percent—although, by correcting the misclassification of a large number of workers (who were classified as employed but absent from work), the official rate would have been about 3 percentage points higher. Moreover, the surveys on which those data are based only capture those who were unemployed in mid-May.

If we allow for the fact that at least some workers have been forced to have the freedom to return to work in recent months, then the total number of fully unemployed workers is something on the order of 33 million.* That would mean an unemployment rate of more than 21 percent, which is very close to the rate last seen in the first Great Depression (25 percent) and more than twice the highest rate (10 percent) suffered during the Second Great Depression.**

On top of that, we should add in the workers who are involuntarily working part-time jobs—in other words, workers who would like to have full-time jobs but have been forced “for economic reasons” to accept fewer hours. The reserve army of unemployed and underemployed workers then rises to more than 43.5 million.

Moreover, as I argued recently, millions of unemployed workers are not included in this number:

In addition to first-time job-seekers who have unable to find a job (some unknown portion of an estimated 3.8 million high-school graduates, 1 million who graduated with associate’s degrees, and 2 million with bachelor’s degrees), it doesn’t include any of the estimated 8 million undocumented workers who have lost their jobs.

Meanwhile, employers and the White House (including Labor Secretary Eugene Scalia) are continuing to clamor for businesses to be allowed the freedom to reopen. But they’re worried unemployed workers, who have received supplemental benefits as a result of the CARES act, will not want to return to work under with the risk of becoming infected with the virus. So, they’ve announced both that the extra $600 “disincentive” for people to return to work will be allowed to expire at the end of July and that any workers who refuse to be called back to work will lose their unemployment payments.

Their only plan, in the midst of the pandemic, is to turn the screws and force more and more American workers to have the freedom to sell their ability to work to someone else.

 

*I used the following, perhaps overly generous, assumption: 3 in 10 workers who filed initial claims in the past fourteen weeks have gone back to work. My total is a bit higher than the sum of “continued claims” (19.5 million) and workers receiving Pandemic Unemployment Assistance (11.1 million).

**At the highest of levels of unemployment following the 2007-08 crash, there were 15.3 million jobless Americans.

Chart of the day

Bullets flyin’, helicopters, police sirens, preachers lying
Genocism, criticism, unemployment, racism. . .
That’s exactly what Hell look like

— Kendrick Lamar, “Heaven & Hell”

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.5 million American workers filed initial claims for unemployment compensation. That’s on top of the 42.7 million workers who were laid off during the preceding eleven weeks.

Here is a breakdown of each week:

• week ending on 21 March—3.31 million

• week ending on 28 March—6.87 million

• week ending on 4 April—6.62 million

• week ending on 11 April—5.24 million

• week ending on 18 April—4.44 million

• week ending on 25 April—3.87 million

• week ending on 2 May—3.18 million

• week ending on 9 May—2.69 million

• week ending on 16 May—2.45 million

• week ending on 23 May—2.13 million

• week ending on 30 May—1.88 million

• weeks ending on 6 June—1.54 million

All told, 44.21 million American workers have filed initial unemployment claims during the past three months.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 12-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 17, 24, and 31 January, 7, 14, 21, 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 28 December, 4, 11, 18, and 25 January, 1, 8, 15, 22, and 29 February and 7 and 14 March 2020).

As readers can see in the chart above, the difference is stunning: 7.7 million workers filed initial claims during the worst 12-week period of 2009, 2.6 million from late December to mid-March of this year, and 44.2 million in the past twelve weeks.

Once again, keep in mind, the most recent numbers still don’t include perhaps millions of other American workers, since many states are still addressing backlogs of claims. Masses of workers have been unsuccessful in applying for unemployment insurance because state websites and phone lines are inundated and still, even now, not working correctly.

Moreover, because they’re only initial claims, the numbers also don’t include the 7.1 million American workers who were deemed officially unemployed in early March, before most of the shutdowns started.

According to the most recent report from the Bureau of Labor Statistics, the number of unemployed workers fell by 2.1 million to 21.0 million in May, leading to an official unemployment rate of 13.3 percent—although, by correcting the misclassification of a large number of workers (who were classified as employed but absent from work), the official rate would have been about 3 percentage points higher. Moreover, the surveys on which those data are based only capture those who were unemployed in mid-May.

If we allow for the fact that at least some workers have been forced to have the freedom to return to work in recent months, then the total number of fully unemployed workers is something on the order of 38.9 million.* That would mean an unemployment rate of more than 24.6 percent, which is just below the rate last seen in the first Great Depression (25 percent) and almost two and a half times the highest rate (10 percent) suffered during the Second Great Depression.**

On top of that, we should add in the workers who are involuntarily working part-time jobs—in other words, workers who would like to have full-time jobs but have been forced “for economic reasons” to accept fewer hours. The reserve army of unemployed and underemployed workers then rises to more than 49.54 million—or 31.3 percent of the U.S. labor force.

Moreover, as I argued this past Monday, millions of unemployed workers are not included in this number:

In addition to first-time job-seekers who have unable to find a job (some unknown portion of an estimated 3.8 million high-school graduates, 1 million who graduated with associate’s degrees, and 2 million with bachelor’s degrees), it doesn’t include any of the estimated 8 million undocumented workers who have lost their jobs.

Right now, no one in the White House is offering a real plan for the tens of millions of unemployed and underemployed American workers to be able to pay the rent, purchase health insurance, or get enough to eat.

 

*I used the following, perhaps overly generous, assumptions: 1 in 2 workers who were unemployed in mid-March have been able to find jobs and 2 in 10 workers who filed initial claims in the past eleven weeks have gone back to work.

**At the highest of levels of unemployment following the 2007-08 crash, there were 15.3 million jobless Americans.

Rigged unemployment numbers—pandemic edition

There are lies, there are outrageous lies, and there are statistics.

— Robert Giffen, Economic Journal (1892)

Are U.S. unemployment numbers rigged? Sure, they are!

They’re not rigged in the way Paul Krugman implied last Friday (“This being the Trump era, you can’t completely discount the possibility that they’ve gotten to the BLS”). Or in the way former General Electric CEO Jack Welch suggested back in 2012 (when he asserted that the Obama White House had manipulated the job figures for political gains). Or in the way Donald Trump used to say the unemployment rate was “phony” (“The number is probably 28, 29, as high as 35 [percent]. In fact, I even heard recently 42 percent.”) until, of course, he became president and declared the rising jobs numbers a “blowout” (even though he and his economic advisers used some questionable math) and, most recently, the falling unemployment rate a “great day” (for George Floyd, whom Trump said was “looking down right now and saying this is a great thing that’s happening for our country,” and “for everybody”).

No, the jobs numbers are not manipulated in those ways. They’re rigged—in my view, much more seriously—in terms of the ways the various categories are defined and measured and the manner in which the data are collected. And, of course, the ways values are imputed to the rising and falling numbers.

Let’s start with the last point: why should we believe, as most news outlets and Trump himself proclaimed (including FiveThirtyEight, which declared it “shockingly good”), that the much-publicized recent fall in the official unemployment rate (from 14.7 percent in April to 13.3 percent in May) is a good thing? We’re still in the midst of the COVID-19 pandemic, when workers should be paid to stay home. Instead, they’re being forced to have the freedom to return to selling their ability to work—because their employers want to make profits by hiring them and workers themselves are finding it difficult to get by on unemployment benefits (when, that is, they’ve been able to obtain them). Why is that something we should applaud?

Moreover, even according to the unadjusted numbers, there were still 21 million unemployed American workers in May. Let’s remember that, at the worst point of the Second Great Depression (in October 2009), the highest unemployment rate was 10 percent and the largest number of unemployed workers was 15.4 million.

As for the rest, the first sign there may be a problem with the unemployment numbers is the admission, in the text of the official report from the Bureau of Labor Statistics, that many workers may have been misclassified. Workers who were “employed but absent from work” were supposed to be counted as “unemployed on temporary layoff” but many, it seems, were not.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis).

Fixing that error would raise the official unemployment rate in May to 16.3 percent.

Now, let’s consider what the official statistics mean and don’t mean. This is an exercise I used to do with all of my students, most of whom had no idea how the unemployment numbers were defined and calculated, even after taking many mainstream economics courses.

The official or headline unemployment rate is actually one of 6 rates reported by the Bureau of Labor Statistics, referred to as U-3. To be counted as unemployed according to the U-3 rate, a worker has to (a) have had a job, (b) been laid off from a job, and (c) be actively looking for a new job. (In addition, they’re not counted if they’re in the armed forces, in prison, or undocumented.)

The rates and total numbers of officially unemployed workers, from January 2007 to May 2020, are illustrated in the two charts below.

So, who is not included in these numbers? The headline unemployment rate doesn’t include workers (such as high school and college graduates) who are looking for their first jobs. It doesn’t include workers who are involuntarily working at part-time jobs (working any number of hours, including 1 hour a week, counts as “employed”). And it doesn’t include workers who want a job but are “discouraged” and therefore have given up actively looking for a job.

The so-called U-6 rate includes two of those groups, in addition to the unemployed workers that form the U-3 rate: workers who are employed part-time for “economic reasons” and workers who are considered “marginally attached” to the labor force.

As readers can see, the U-6 rate (the green line in the chart above) is always much higher than the U-3 rate (the blue line). In May, it was 21.2 percent, compared to the rate of 13.3 percent that was widely reported in news outlets.

And then there’s the group of 4.8 million workers who were considered misclassified in the most report. Add them all together and the United States actually had a total of 45.4 million workers who were either unemployed or underemployed in May. That’s exactly one-third the size of the entire employed population in the United States.

But that U-6 plus misclassified total still doesn’t adequately capture the dire straits of American workers. In addition to first-time job-seekers who have unable to find a job (some unknown portion of an estimated 3.8 million high-school graduates, 1 million who graduated with associate’s degrees, and 2 million with bachelor’s degrees), it doesn’t include any of the estimated 8 million undocumented workers who have lost their jobs.

The only conclusion is that the official unemployment figures are in fact rigged—not by any particular malfeasance or corrupt intervention into the Bureau of Labor Statistics, but by the way the unemployed are defined, measured, and counted. The reserve army of unemployed and underemployed workers is actually much larger than the figures cited by the White House and widely reported in news outlets.

In the end, what matters for American workers is less that the statistics are biased. It’s more that the prevailing economic institutions in the United States—which use and abuse them as wage-slaves, no more so than during the current pandemic—are rigged against them.

Chart of the day

Gambling man rolls the dice, workingman pays the bill
It’s still fat and easy up on banker’s hill
Up on banker’s hill, the party’s going strong…
Down here below we’re shackled and drawn

— Bruce Springsteen, “Shackled and Drawn”

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 1.9 million American workers filed initial claims for unemployment compensation. That’s on top of the 40.8 million workers who were laid off during the preceding ten weeks.

Here is a breakdown of each week:

• week ending on 21 March—3.31 million

• week ending on 28 March—6.87 million

• week ending on 4 April—6.62 million

• week ending on 11 April—5.24 million

• week ending on 18 April—4.44 million

• week ending on 25 April—3.87 million

• week ending on 2 May—3.18 million

• week ending on 9 May—2.69 million

• week ending on 16 May—2.45 million

• week ending on 23 May—2.13 million

• week ending on 30 May—1.88 million

All told, 42.65 million American workers have filed initial unemployment claims during the past eleven weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 11-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 24 and 31 January, 7, 14, 21, 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 4, 11, 18, and 25 January, 1, 8, 15, 22, and 29 February and 7 and 14 March 2020).

As readers can see in the chart above, the difference is stunning: 6.5 million workers filed initial claims during the worst 11-week period of 2009, 2.19 million from late January to mid-March of this year, and 42.65 million in the past eleven weeks.

Once again, keep in mind, the most recent numbers still don’t include perhaps millions of other American workers, since many states are still addressing backlogs of claims. Masses of workers have been unsuccessful in applying for unemployment insurance because state websites and phone lines are inundated and still, even now, not working correctly.

Moreover, because they’re only initial claims, the numbers also don’t include the 7.1 million American workers who were deemed officially unemployed in early March, before most of the shutdowns started.

According to the most recent report from the Bureau of Labor Statistics (pdf), the number of unemployed workers rose by 15.9 million to 23.1 million in April, leading to an official unemployment rate of 14.7 percent—”the highest rate and the largest over-the-month increase in the history of the series.” But the surveys on which those data are based only capture those who were unemployed in mid-April.

If we allow for the fact that at least some workers have been forced to have the freedom to return to work in recent months, then the total number of fully unemployed workers is something on the order of 36.2 million.* That would mean an unemployment rate of more than 24.1 percent, which is getting closer and closer to the rate last seen in the first Great Depression (25 percent) and almost two and a half times the highest rate (10 percent) suffered during the Second Great Depression.**

On top of that, we should add in the workers who are involuntarily working part-time jobs—in other words, workers who would like to have full-time jobs but have been forced “for economic reasons” to accept fewer hours. The reserve army of unemployed and underemployed workers then rises to more than 48.5 million—or 31 percent of the U.S. labor force.

Moreover, as Patricia Cohen reminds us, millions of unemployed workers are not included in these numbers:

Laid-off workers who have not applied for benefits and those who have left the labor force entirely are not included. Nor are any of the eight million undocumented workers who lost their jobs. They are not eligible for any benefits. Neither are new graduates just entering the labor force.

Right now, no one in the White House is offering a real plan for the tens of millions of unemployed and underemployed American workers to be able to pay the rent, purchase health insurance, or get enough to eat.

 

*I used the following, perhaps overly generous, assumptions: 1 in 2 workers who were unemployed in mid-March have been able to find jobs and 2 in 10 workers who filed initial claims in the past eleven weeks have gone back to work.

**At the highest of levels of unemployment following the 2007-08 crash, there were 15.3 million jobless Americans.

Chart of the day

If we needed any more confirmation of who’s been laid off during the current crisis, all we need to do is examine the change in average hourly wages.

In the past month (so, April 2020), the year-over-year increase in hourly wages jumped to 7.9 percent. That’s more than three times the average increase since 2008 (2.5 percent) and more than two and half times the increase since Donald Trump took office (3 percent).

That doesn’t mean American workers are now earning more. Oh, sure, perhaps a few, who have been granted temporary increases to commute and work in precarious conditions—the ones who were receiving so-called “heroic pay,” which in many cases (such as Kroger supermarkets) is now being cancelled. No, the April increase mostly tells us, first, that tens of millions of works have been laid off and, second, that the vast majority of the workers who were fired in April were at the lower end of the wage scale.

Those low-wage workers—in retail, hospitality, healthcare, and other sectors—are no longer employed. So, their wages don’t count as part of the average. Therefore, the average hourly wage (of all private-sector workers), in comparison to last year at the same time, rose dramatically.

What it means, then, is: those who can least afford it, have been let go and are now struggling to survive on unemployment insurance and charity from food banks. They are the new members of the reserve army of unemployed workers, which in the months and years ahead will serve to hold down wage increases for and generally weaken the position of all workers.

That, alas, is how capitalist labor markets are working (for employers) and not working (for employees) during this pandemic crisis.

Reserve army—pandemic edition

You know things are bad—and going to get worse—when a mainstream newspaper like the Washington Post invokes the Mohr:

What Karl Marx once called “the reserve army of the unemployed” will probably keep wage growth in check as the recovery inches forward.

Despite the inverted commas, Marx never used that exact phrase. He referred to an “industrial reserve army” or “relative surplus population” (in chapter 25 of volume 1 of Capital), which he saw as both a result and a condition of capitalist growth.

The course characteristic of modern industry, viz., a decennial cycle (interrupted by smaller oscillations), of periods of average activity, production at high pressure, crisis and stagnation, depends on the constant formation, the greater or less absorption, and the re-formation of the industrial reserve army or surplus population. In their turn, the varying phases of the industrial cycle recruit the surplus population, and become one of the most energetic agents of its reproduction.

In particular, the existence of a reserve army serves to discipline labor, keeping its wage demands in check, since employed workers are forced to compete with unemployed and underemployed workers for the available jobs.

For my part, I have variously used the terms “reserve army of the unemployed,” “reserve army of the unemployed and underemployed,” and “reserve army unemployed, underemployed, and low-wage workers” to get at much the same issue. And, as is clear from the chart at the top of the post, the reserve army has played its role: since 2000, the index of the labor share of national income in the United States (the blue line, with 2007 equal to 100) has fallen from 108.2 to 96.7. Moreover, the trendline (the red line, which I fitted to the data with a fifth degree polynomial) not only shows a precipitous decline since the turn of the century, but also very little movement during the so-called recovery from the Second Great Depression.

And that’s when the unemployment rate had fallen as low as 3.5 percent (in February of this year). Now it has skyrocketed—to 14.7 percent according to the official rate and at least 24.9 percent according to my own calculations. The tens of millions of new layoffs from the pandemic shutdown have clearly swelled the ranks of the reserve army, as well as the newly impoverished attempting to register for unemployment compensation and waiting in lines outside food banks, in the United States.

We don’t know yet how large the reserve army will actually get, which will depend both on new hires (as some firms continue to operate and even expand or attempt to reopen, to return to making profits) and new layoffs (as other firms go under, either never reopening or being acquired by other firms that have survived).

According to a recent study by Jose Maria Barrero, Nick Bloom, and Steven J. Davis, the COVID-19 shock caused 3 new hires in the near term for every 10 layoffs. However, they also estimate, based on survey evidence and historical evidence of how layoffs relate to recalls, that 42 percent of recent pandemic-induced layoffs will result in permanent job loss.

What that means is the reserve army of unemployed and underemployed workers will continue to increase in the coming months. As a result, I expect the trend of the labor share, which had already started falling prior to the pandemic, to continue to decline.

The way the American economy is currently configured, private employers will only start to hire workers and decrease the reserve army when it is profitable to do so. And workers will be at the mercy of those decisions and, as a result, continue to lose out on an aggregate level to their opposite number, the corporations that alone control hiring decisions.

As Marx wrote,

The folly is now patent of the economic wisdom that preaches to the labourers the accommodation of their number to the requirements of capital. . .The first word of this adaptation is the creation of a relative surplus population, or industrial reserve army. Its last word is the misery of constantly extending strata of the active army of labour, and the dead weight of pauperism.

That would only change in the United States today if the economy were transformed, for example, by a government jobs program (such as the United States implemented during the first Great Depression, with the Works Progress Administration) or by allowing workers to have a say in hiring decisions (either by occupying seats on the boards of directors of existing corporations or by expanding the number of worker-owned enterprises).

Only with such changes would the reserve army be absorbed, the ranks of the newly impoverished decrease, and the trend in the labor share of national income turn around and start to rise.

Don’t worry?!

Liberal mainstream economists all seem to be lip-synching Bobby McFerrin these days.

Worried about automation? Be happy, write Laura Tyson and Susan Lund, since “these marvelous new technologies promise higher productivity, greater efficiency, and more safety, flexibility, and convenience.”

Worried about the different positions in current debates about economic policy? Be happy, writes Justin Wolfers, and rely on the statistics produced by government agencies and financial firms and the opinions of mainstream economists.

Me, I remain worried and I have no reason to accept mainstream economists’ advice for being happy.

Sure, new forms of automation might lead to higher productivity and much else that Tyson and Lund find so alluring. But who’s going to benefit? If we go by the last few decades, large corporations and wealthy individuals are the ones who are going to capture most of the gains from the new technologies. Everyone else, as I have written, is going to be forced to have the freedom to either search for new jobs or deal with the fundamental transformation of the jobs they manage to keep.

When it comes to separating fact from fiction, aside from the embarrassing epistemological positions liberals rely on, where are the statistics that might help us make sense of what is going on out there—numbers like the Reserve Army of Unemployed, Underemployed, and Low-wage Workers or the rate of exploitation.

You want me not to worry? Analyze what’s going to happen to workers and the distribution of income as automation increases and calculate the kinds of economic numbers other theoretical traditions have produced.

Even better, let workers have a say in what and how new technologies are introduced and change economic institutions in order to eliminate the Reserve Army and class exploitation.

Then and only then will I be happy.