Posts Tagged ‘Second Great Depression’

claims6

Should supply greatly exceed demand, a section of the workers sinks into beggary or starvation. The worker’s existence is thus brought under the same condition as the existence of every other commodity.

— Karl Marx, Economic and Philosophic Manuscripts of 1844

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 2.44 million American workers filed initial claims for unemployment compensation. That’s on top of the 36.49 million workers who were laid off during the preceding seven 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—3.85 million

• week ending on 2 May—3.17 million

• week ending on 9 May—2.98 million

• week ending on 16 May—2.44 million

All told, 38.6 million American workers have filed initial unemployment claims during the past nine weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant nine-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 7, 14, 21, 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 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: 5.87 million workers filed initial claims during the worst nine-week period of 2009, 1.98 million from late January to mid-March of this year, and 38.64 million in the past nine 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 34.5 million.* That would mean an unemployment rate of around 22 percent, which is getting closer and closer 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 45 million—or 29 percent of the U.S. labor force.

And, according to Jose Maria Barrero, Nick Bloom, and Steven J. Davis (pdf), something on the order of 42 percent of recent layoffs will result in permanent job loss. As Bloom explains,

Firms intend to hire these people back. But we know from the past that these aspirations often don’t turn out to be true.

 

*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 nine 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.

initial claims 5

But really we can’t even say we
Have no explanation
For that would injure us gravely
Not being the way to win

— Bertolt Brecht, “The unemployment, gentlemen. . .”

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 2.98 million American workers filed initial claims for unemployment compensation. That’s on top of the 33.48 million workers who were laid off during the preceding seven 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—3.85 million

• week ending on 2 May—3.17 million

• week ending on 9 May—2.98 million

All told, close to 36.5 million American workers have filed initial unemployment claims during the past eight weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant eight-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 14, 21, 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 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: 5.23 million workers filed initial claims during the worst eight-week period of 2009, 1.76 million from late January to mid-March of this year, and 36.49 million in the past eight 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 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 33 million.* That would mean an unemployment rate of around 21 percent, which is getting closer and closer to the rate last seen in the first Great Depression (25 percent) and twice the highest rate (10 percent) experienced 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 army of unemployed and underemployed workers then rises to something on the order of 44 million—or 28 percent of the U.S. labor force.

 

*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 two months have gone back to work.

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

initial claims4

I propose a job for everyone, not a promise to see if jobs can be found. . .If our government cannot create jobs, it cannot govern.

Martin Luther King, Jr.

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 3.17 million American workers filed initial claims for unemployment compensation. That’s on top of the 30.31 million workers who were laid off during the preceding six 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—3.85 million
    • Week ending on 2 May—3.17 million

 

All told, close to 33.5 million American workers have filed initial unemployment claims during the past seven weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant seven-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 21 and 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 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: 4.59 million workers filed initial claims during the worst seven-week period of 2009, 1.55 million from early February to mid-March of this year, and 33.48 million in the past seven 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—although Labor Secretary Eugene Scalia doesn’t know how many. Masses of workers have been unsuccessful in applying for unemployment insurance because state websites are freezing and their phones are inundated with inquiries.

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.

Add them together, and the number of workers currently unemployed in the United States is now more than 40 million.* That would mean an American unemployment rate of something on the order of 24.9 percent, which is virtually identical to the rate last seen in the first Great Depression (estimated to have been 25 percent) and two and half times the highest rate (10 percent) experienced during the Second Great Depression.**

 

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

**We should also remember that, on average (since 1994), the U6 unemployment rate (which includes so-called discouraged workers and those working part-time for economic reasons) is 1.8 times the official (U3) unemployment rate. Thus, for example, the U6 unemployment rate was 17.1 percent in October 2009, when the official rate was 10 percent. Right now, we don’t have a good measure of the number of workers who either haven’t been able to file for unemployment or whose hours have been cut, forcing them to work part-time. There is no doubt, however, that the number of currently unemployed or underemployed workers is much higher than 40 million.

initial

We can almost calculate the moment when the unemployed losing patience will take their own fate into their own hands.

Friedrich Engels

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 3.84 million American workers filed initial claims for unemployment compensation. That’s on top of 4.43 million workers who are laid off during the week ending on 18 April, 5.24 million workers during the week ending 11 April, 6.62 million workers during the week ending 4 April, 6.87 million workers during the week ending 28 March, and another 3.31 million in the previous week.

All told, more than 30 million American workers have filed initial unemployment claims during the past six weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 6-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 28 February, 7, 14, 21, and 28 March, and 4 April 2009) and the weeks immediately preceding the current depression (so, 8, 15, 22, and 29 February and 7 and 14 March 2020).

As readers can see in the chart above, the difference is stunning: 3.94 million workers filed initial claims during the worst 6-week period of 2009, 1.35 million from mid-February to mid-March of this year, and 26.45 million in the past six weeks.

Once again, keep in mind, the most recent numbers still don’t include perhaps millions of other American workers, since many states (such as Florida) are still addressing backlogs of claims. Masses of workers have been unsuccessful in applying for unemployment insurance because state websites are freezing and their phones are inundated with inquiries.

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.

Add them together, and the number of workers currently unemployed in the United States is now close to 37 million.* That would mean an American unemployment rate of something on the order of 22.4 percent, which week by week is getting close to the level (estimated to have been about 25 percent) last seen in the first Great Depression and more than double the highest rate (10 percent) experienced during the Second Great Depression.**

 

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

**We should also remember that, on average (since 1994), the U6 unemployment rate (which includes so-called discouraged workers and those working part-time for economic reasons) is 1.8 times the official (U3) unemployment rate. Thus, for example, the U6 unemployment rate was 17.1 percent in October 2009, when the official rate was 10 percent. Right now, we don’t have a good measure of the number of workers who either haven’t been able to file for unemployment or whose hours have been cut, forcing them to work part-time. There is no doubt, however, that the number of currently unemployed or underemployed workers is much higher than 37 million.

In 2011, the Business Insider Australia put together a gallery of photos from the Second Great Depression. Their justification was that, “In 50 years, when historians write about this period. . .it will be photos like these that tell the story.”

Their idea was to assemble a collection that would serve the same purpose as the iconic photos of the first Great Depression (many of them having been carefully staged, edited, and cropped), which tell a particular story of that time and the people who fell victim to its widespread, dramatic, and devastating economic and social crises.

I decided to do the same for the current economic depression—even though, I fully understand, it’s far from being over. Actually, I started out by musing about the bread lines in the 1930s in comparison to the long lines outside food banks in recent weeks. Later, the idea expanded and I ended up with the following fifteen photos.

Clearly, these do not rise to the level of many of the photos from the first Great Depression, by such famous photographers as Dorothea Lange, Walker Evans, and Marion Post Wolcott. They’re all, with one exception (by Tom Barrett, the tenth one in the sequence, in Milwaukee), copied from online news media.

But together they do tell a story of these times. . .

1

G.E. employees and their families protest outside of Appliance Park in Louisville, KY

Cars line up in the parking lot at a drive-through food pantry at Woodland Mall in Grand Rapids, MI

A food bank at the Open Door Church of God in Christ in Brooklyn, NY

4

Amazon employees hold a protest over conditions at the company’s distribution facility on Staten Island, NY

5

Hew Kowalewski, a furloughed employee of Disney World, stands next to a window of his home in Kissimmee, FL

6

People who lost their jobs wait in line to file for unemployment benefits at an Arkansas Workforce Center in Fayetteville

7

Cashiers at a grocery store in Brooklyn, NY

8

A worker carries Amazon boxes in New York City

9

A tired healthcare worker is seen by the Brooklyn Hospital Center

10

Downer Theatre in Milwaukee, WI

11

34th Street in New York City

12

Passengers on the 24 Divisadero bus in San Francisco, CA

13

Central American migrants seeking asylum return to Mexico over the border bridge between El Paso and Ciudad Juarez

14

A pedestrian walks past graffiti that reads “Rent Strike” in Seattle’s Capitol Hill neighborhood

15

Milwaukee resident Jennifer Taff holds a sign as she waits in line to vote at Washington High School in Milwaukee, WI

claims3

This morning, the U.S. Department of Labor (pdf) reported that, during the week ending last Saturday, another 4.43 million American workers filed initial claims for unemployment compensation. That’s on top of 5.24 million workers who were laid off during the week ending on 11 April, 6.62 million workers during the week ending 4 April, 6.87 million workers during the week ending 28 March, and another 3.31 million in the previous week.

All told, more than 26 million American workers have filed initial unemployment claims during the past five weeks.

To put that into some kind of perspective, I calculated the initial claims totals for two other relevant 5-week periods: the worst point of the Second Great Depression (encompassing the weeks ending on 7, 14, 21, and 28 March and 4 April 2009) and the weeks immediately preceding the current one (so, 15, 22, and 29 February and 7 and 14 March 2020).

As readers can see in the chart above, the difference is stunning: 3.29 million workers filed initial claims during the worst 5-week period of 2009, 1.15 million from mid-February to mid-March of this year, and 26.45 million in the past five 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 are freezing and their phones are inundated with inquiries.

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.

Add them together, and the number of workers currently unemployed in the United States is now more than 33 million.* That would mean an American unemployment rate of something on the order of 20.6 percent, which is getting closer and closer to the level (estimated to have been about 25 percent) last seen in the first Great Depression and more than double the highest rate (10 percent) experienced during the Second Great Depression.

 

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

237644_rgb_768

In retrospect, I can now recognize that we were both right and wrong, as is always the case when one tries to look into the future.

— Henning Mankell

Regular readers of this blog know two things about me: I don’t make predictions. And I use these posts not to pronounce firm conclusions or solutions, but to try to work through the issues and clarify my thinking.

So, think of this as an exercise in trying to make sense of the ongoing debate concerning the shape of the recession and the speed of the recovery from the severe economic crisis induced by the response—by U.S. corporations, banks, workers, various levels of the government, and others—to the novel coronavirus pandemic. Nothing more.

Moreover, I don’t have or offer a single theory of capitalists crises, no set of “laws of motion” that inexorably (at least in the last instance) work themselves out to produce every recession, depression, or other economic meltdown within capitalism. For me, every crisis is a singular event, which requires a conjunctural analysis—and this one is no different.

recoveries

That said, I think we can all agree that the current crisis is severe—in terms of a variety of indicators, from the projected decline in Gross Domestic Product to the current and projected additional rise in unemployment. It’s probably the most dramatic since the first Great Depression of the 1930s, and therefore worse than any of the eight other economic downturns (including what I have called the Second Great Depression) since 1960.*

The big question is, how long will it last—that is, will American capitalism rebound and how quickly will that occur?

That’s the question that seems to be on everyone’s minds these days, from Donald Trump and the right-wing anti-shutdown protestors through businesses and banks both large and small to the millions of workers whose lives have been decimated either by being laid off or being forced to have the freedom to continue to work under conditions that imperil their health and lives.

And the stakes couldn’t be higher. In Trump’s case, for example, a quick recovery increases his chances of reelection in November—although that might not work out exactly as he hopes if reopening the economy prematurely means thousands more American deaths. A longer downturn, on the other hand, calls into question capitalism’s resilience, highlights even more the grotesque levels of inequality that characterize the United States, and serves to legitimize more generous government-sponsored social programs (including, e.g., a universal or unconditional basic income) to mitigate the effects of the crisis on workers, their families, and their communities.

So, what will the COVID-19 recession look like: will it be V-shaped, U-shaped, or W-shaped (to use the alphabet soup most recently discussed by David Rodeck)?

V

One possibility is for a relatively quick, V-shaped downturn and recovery such as occurred in the early 1990s (starting with a recession that lasted for 8 months, from July 1990 to March 1991, followed by a relatively speedy recovery).

It’s a rosy forecast that has been offered by such theoretical and politically different economists as Gregory Mankiw (putting on his optimist cap) and Dean Baker, as well as a couple of my friends (in private communications). The basic idea is that the crisis was caused not by capitalism’s “inner workings” (such as the bursting of a speculative bubble or a decline in the profit rate), but by the pandemic and the government-mandated shutdown of businesses. So, the logic goes, as soon as the shutdowns are lifted, businesses will reopen, workers who were furloughed or laid off will head back to their employers, and spending (both consumption and investment) will rebound.

In other words, capitalists will be able to bury the bodies (both literally and figuratively) and get back to business as usual—although it’s quite possible, even then, that U.S. capitalism itself will look quite different (with increased concentration, especially in the retail sector, and even more inequality).

U

A second, less-optimistic picture is a U-shaped cycle, with a prolonged downturn and extended trough, and thus a delayed recovery—something like the United States experienced during the Second Great Depression (the so-called Great Recession itself lasted 18 months from peak to trough). Here, we’re talking about a much longer decline in economic growth (comprising 5 quarters of negative real GDP growth, from early 2008 to mid-2009) with soaring unemployment (reaching a peak of 10 percent), and, of course, an almost complete meltdown of the financial sector.

We don’t yet know how severe economic growth is or will be (although the authors of a recent National Bureau of Economic Research working paper forecast a year-on-year contraction in U.S. real GDP of nearly 11 percent as of the fourth quarter of 2020, while the 90-percent confidence interval extends to a nearly 20-percent contraction) but unemployment is already at an alarming level (18 percent, by my estimate) and will no doubt increase in the coming months.** Moreover, it’s quite possible that many of the workers who have been furloughed or laid off will not soon be reintegrated into their previous jobs or find, at least in the medium term, new jobs. That’s because many businesses will not reopen or will be acquired, as happens during every capitalist crisis, and the remaining businesses will resume with smaller workforces (e.g., because of automation and speed-ups). And, of course, certain sectors (such as transportation and any activity that involves large gatherings, such as professional and collegiate sports) will likely reopen very slowly.

In addition, a recent study suggests that forecasters (both researchers and government agencies) tend to be too optimistic about when recession recoveries will begin, which means the return to a normal economy could be slower and bumpier than many economists are currently predicting.

Finally, we still don’t know the likely trajectory of the pandemic, both within and across countries. Especially as tentative steps are being taken to reopen the U.S. economy, it’s quite possible, without widespread testing and an effective vaccine, that we’ll see a second or third wave of COVID-19, which will require new shutdowns.***

W

That leaves us, then, with a third possibility: a W-shaped recession and recovery, such as took place in the early 1980s, with an initial downturn (from January to July 1980) followed in short order by a second, more severe one (from July 1981 to November 1982).

Such a double-dip recession, with a short recovery inbetween, might occur if the economy is reopened and pent-up demand (for everything, from cars to the commodities in brick-and-mortar stores and restaurants) leads to a surge in consumption, but the initial recovery is disrupted by households attempting to rebalance their finances (e.g., to pay for healthcare and to make up for foregone paychecks) and businesses that, after selling off their inventories, curtail both new purchases and longer-term investment projects in the face of considerable uncertainty. That would mean a new round of furloughs and layoffs, even without new waves of the pandemic.

Of course, if the novel coronavirus does get out of control again (e.g., as recently happened in Singapore), either because of its spread from one region to another the United States or because of outbreaks abroad (which in coming months may be experiencing only the initial stages of the pandemic), then the likelihood of a W-shaped cycle would increase.

As I wrote at the top, I don’t make predictions, and I have no idea which of these three possibilities is most likely. What I do know is that the existing way of organizing economic and social life in the United States, which was already inflicting its pains and punishments on most of the American people while favoring a tiny group at the top, has proven to be even more poorly equipped to handle a pandemic. The public healthcare system, notwithstanding the heroic work of its workers, has clearly come up short. And the way the system has stranded workers and the owners of small businesses, who have barely benefited from the bailouts that have mostly favored large banks and corporations, has made a terrible situation even worse.

Regardless of the depth of the recession and the speed of the recovery, the real debate in the months ahead will center on one question: what fundamental changes need to be made so that, in moving forward, the grotesquely unequal imposition and shifting of burdens favored by American economic and political elites can finally be eliminated?

 

*The designation of a recession is the province of a committee at the National Bureau of Economic Research. Contrary to popular belief, which equates a recession with two consecutive quarters of negative GDP growth, an NBER recession is a monthly concept that takes into account a number of monthly indicators—such as employment, personal income, and industrial production—as well as quarterly GDP growth. And just to be clear, the NBER does not have or utilize a separate category or metric for capitalism’s depressions.

**According to a newly released poll from the Pew Research Center, 43 percent of American adults say their households have suffered a job loss or a cut in pay since the start of the coronavirus crisis, marking a 10-point increase from a month ago. Among lower-income adults (with annual incomes less than roughly $37,500), an even higher share (52 percent) say they or someone in their household has experienced this type of job upheaval.

***The CDC is now warning that a second wave of the novel coronavirus later this year may be far more dire because it is likely to coincide with the start of flu season.