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U.S. economy stuck in worst recession since the Great Depression

By Masao Suzuki |
August 30, 2020
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San José, CA - On Thursday, August 27, the latest report on unemployment insurance shows that the U.S. economy remains stuck in the worst recession since the Great Depression of the 1930s. While new claims for regular state unemployment insurance benefits did drop to a little, over 1 million for the week ending August 22, the federal Pandemic Unemployment Assistance or PUA for gig workers and self-employed rose the same week. Together the two stayed the same as the week before, and slightly higher than two weeks ago. One million new applications for state unemployment insurance is five times the rate at beginning of the year.

The report also showed a continued rise in the Pandemic Emergency Unemployment Compensation or PEUC as well as the Extended Benefits or EB programs. Both of these programs provide an additional three months of benefits to jobless workers whose regular unemployment benefits have run out. This shows the continuing rise of the long term unemployed who are at greatest economic risks.

The dismal drumbeat of corporate announcements of mass layoffs continued in the past week. American Airlines confirmed that it was going to lay off more than 19,000 workers on top of the thousands who have taken furloughs, retired, or otherwise left the company. United Airlines has a standing announcement of 30,000 layoffs as the passenger traffic is down by more than two thirds as the pandemic continues to burn through the United States.

There are growing signs that households are coming under increasing stress with the continuing recession, made worse by the end of the additional $600 a week in unemployment benefits. The Consumer Confidence Index for August fell for the second month in a row, to 84.8, down 36% since the recession began in February. Food sales also fell in the first two weeks of August.

While President Trump signed an executive order calling on federal agencies “examine” steps that they could take to prevent evictions and foreclosures, a tidal wave of evictions is building from coast to coast. The end of the CARES Act federal eviction and foreclosure moratoriums, combined with the end of state and local moratoriums, could put 20 to 30 million tenants at risk of evictions.

President Trump’s executive order on unemployment insurance is off to slow start, with only a handful of states starting the addition $300 a week. While about two-thirds of states have said they would participate, they typically would not start paying until September. Even then, the initial federal commitment is only for three weeks, with only about five weeks of money available in the FEMA or Federal Emergency Management Agency.

The Trump administration’s program also excludes many jobless workers even in the states that adopt the plan. Low-wage and workers in states with stingy benefits who get less than $100 a week won’t qualify. Further, workers have to certify that their job loss was COVID-19 related, which was not a condition to get the original $600 in additional benefits under the CARES Act. Further, the Trump program allows state governments to reinstate the job search requirement which had also be waived under the CARES act.

As for Trump’s pet program of deferring the payroll taxes that fund Social Security and Medicare, major capitalist organizations such as the U.S. Chamber of Commerce have recommended that their members not defer taxes as they could be stuck with paying the bill later on.