The White House Council of Economic Advisors released a report today lauding the federal government’s efforts so far to mitigate the effect of the coronavirus pandemic.
The report estimated that 80.6 % of layoffs that resulted from the crisis are likely to be temporary. It credits that to federal outreach, especially the Payroll Protection Program, which it claims “helped stabilize labor markets and facilitated recovery by allowing firms to retain workers and to rehire them as conditions improve.”
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But how much impact has it really had?
The PPP was introduced as part of the $2.2 trillion CARES Act, passed in March, and guaranteed loans to companies and nonprofits with fewer than 500 employees. Despite facing a temporary funding shortfall and concerns about its purportedly too-strict rules for loan forgiveness, the program had been widely utilized before it expired earlier this month. According to the National Retail Federation, as of April, nearly 200,000 small retailers had taken part in the PPP, receiving an average loan of $155,000 each for a total of $29 billion.
Brian Marks, a senior lecturer of economics and business at the University of New Haven, said “There is little doubt that Federal Reserve monetary policy responses and the CARES Act — particularly the PPP, even though flawed — helped prevent a complete economic collapse because of a COVID-19 public health-induced economic crisis in the short-run.”
As proof, he pointed to the U.S. unemployment rate, which has been falling each month since hitting a historic high of 14.7% in April. Last week, jobless claims were under 1 million for the first time since mid-March, according to the Labor Department.
However, Marks does take issue with the White House’s estimation about job losses today. “It is probably too early to assess whether 81% pandemic-related layoffs are likely temporary, especially as it relates to ‘Main Street’ local businesses,” he said.
He highlighted the fact that unemployment data remains somewhat unreliable due to reporting inconsistencies — a problem the Bureau of Labor Statistics mentioned back in April. “Each month thereafter, [the numbers] were understated by as much as 5% in April and as little as (approximately) 1% in July,” said Marks. “Thus, in April, unemployment approached 20% — not the 14.7% reported.”
Matt Priest, president and CEO of the Footwear Distributors & Retailers of America, was also cautious when analyzing the effectiveness of the economic response to COVID.
“The federal government worked very hard to dump a lot of money into the system — and some of that is still being pushed out,” he said. “It remains to be seen the effectiveness of it, and that’ll be analyzed for some years to come. We’ll also have to see how the latter part of the year shapes up, how the lack of stimulus — if there is a lack of stimulus — is going to impact the overall industry.”
He added that certain segments of the population, such as the upper and upper-middle classes have reportedly bounced back. “So the question comes down to what about working-class Americans,” said Priest. “How much of their ability to get back to work and spend money and have disposable income are tied to the artificial injection of capital into the system?”
The White House report comes as lawmakers have hit a stalemate in negotiations for another round of stimulus, and as most members of Congress have adjourned Capitol Hill until September.
President Donald Trump issued a series of executive orders last weekend that included several temporary economic relief measures, including extending unemployment benefits and the federal moratorium on evictions, introducing a payroll tax holiday and providing deferment of student loan payments.