In April of this year, at the peak of the pandemic, the unemployment rates hit a historic 14.7%, which was a post WWII high! Since then, the unemployment rate has decreased but that doesn't paint the full picture. In the turn of the year, there were 965,000 claims filed for unemployment insurance. After the new jobs report came out, we learned that 140,000 jobs were lost in the month of December. But economists agree that 2021 will look better.
Disparity in the Details
If we dig deeper into the details, the pandemic also shined a light on the current socio-economic issues that we've already faced. On THC, we've talked a lot about income and wealth inequality. if we look into the unemployment numbers specifically, we see that the most recent number is 6.7% but what that number doesn't tell you is WHO is losing their jobs.
The lowest paid workers are experiencing this unemployment much harder than what you probably think. The servers, waiters, fast-food workers, are losing their jobs at a faster rate. The lowest paid workers, mostly in the leisure and hospitality industry, are having a whopping 20% unemployment. Unsurprisingly, most of the people who have lost their jobs are either African-American or Latino. The black unemployment rate is 9.9%, hispanic rate is 9.3%, and for whites it lies at 6%. Further, women as a group accounted for all the job losses, losing 156,000 jobs, while men as a group gained 16,000. Women are disproportionately represented among the vulnerable workforce as well, accounting for 51% of these workers nationally, versus 46% in industries not at immediate risk.
But there are active efforts on a government level to address these issues.
Federal Reserve Response
Let's go back to the start of the pandemic. In anticipation for the recession to come, the Federal Reserve had taken actions to reduce interest rates (that were already historically low) to near-zero rates. They also went on a bond-buying spree to ensure liquidity in the markets. Some people think this may have averted a greater crisis, due to how the fed reacted in 2008. Another interesting monetary policy change is the choice of the federal reserve to keep rates low until recovery is shared across social classes.
The house also passed the CARES act which covers a few critical areas: Employee Retention Credit, which incentivizes businesses to keep their employees; Payroll Tax Deferral and Payroll Support, which ensures employers have some breathing room from the adjustments they've had to make in COVID; and a Loan program, to help people get through these tough times. Read more about it here.
We've lost around 3.4 million jobs since the pandemic started and there are more jobs at risk until we control COVID-19. According to a recent survey done by WSJ, economists think that the roll-out of vaccine will determine the rate of recovery of any nation. If you think about it, once people are vaccinated, businesses will be more comfortable having a more open economy.
As we look at these figures and learn about who is really suffering during these challenging times, keep in mind that you know who is being greatly affected by this crisis. We hope that this podcast can help you make informed decisions on how to help where it counts!
Jed Tabernero [00:00:01] In April of this year, at the peak of the pandemic, the unemployment rate hit a historic 14.7%. That's a post World War 2 high. Prompt action was taken on a federal level, and we did see some sort of a rebound in the past few months, the figures in December 2020 aren't exactly showing a pretty picture. The most recent unemployment rate is six point seven percent, although it has seemingly decreased. It's still almost double the unemployment levels prior to the pandemic. Employers cut 140,000 jobs in December, the first decline since the pandemic hit.
Adrian Grobelny [00:00:48] The unemployment rate isn't looking too good, but it looks like it's decreasing, right? Well, let's look at another metric. Unemployment insurance claims. In January 965,000 people filed for unemployment insurance claims. On January 9th. We experienced the biggest weekly gain since the pandemic hit in March, signaling that we have a long way to get to recovery. An engineer, banker and dancer go on a hike
Shikher Bhandary [00:01:43] This is Things Have Changed.
Jed Tabernero [00:01:46] So what is the current state of the overall labor market in the US?
Shikher Bhandary [00:01:51] I mean, look good for a while and then it tanked and then it looked like it was rebounding. And then now last month it tanked to get. Does that sum it up? Sell it up.
Jed Tabernero [00:02:02] As we were mentioning earlier, you know, we had a crazy post-World War Two highest unemployment rate in March when when, you know, the the pandemic hit the US. Right. So it's been a pretty crazy labor market the past couple of months. And we're seeing a lot of Americans losing their jobs and also recovering. Right. We're expecting, as lockdown's eased up for jobs to start returning. And now at the turn of twenty, twenty one, we're seeing the vaccines start getting rolled out. Right. So a lot of economists pretty much agree that as vaccines get rolled out, the economy is going to bounce back slowly. Right? Very slowly. So, you know, compared to other countries, if we really think about it, the U.S. loses jobs and gains jobs faster than most of the other countries. Right. Why is that the case? Most of the other developed countries? Why is that the case? It's because, you know, as you know, U.S. labor market is weird in a way that anybody can just get fired. Right. I was talking to a lot of my colleagues in Europe and, you know, the laws over there for you to get fired. The company has to have such a damn good reason to fire you for you to get fired. So it's so different from the US, right in the US, everybody's kind of like an at will employee where your boss can just fire you because you don't look nice the next day. But but in Europe, it's so different, right? You've got to find like 50 different reasons to get somebody fired so people feel way more secure there. That's also why we're seeing, you know, the US is able to develop more jobs, but we're also seeing that it's able to get rid of those jobs and shed them during times of crisis. So it's super duper quick. And that's that's not a surprise for us. That's just the nature of US employment.
Adrian Grobelny [00:04:02] And I think it's also one of the most efficient markets where you have so many recruiters, you have so many openings all the time, online tech companies and tech jobs. You know, hiring and onboarding people is relatively fast in the US, I think, compared to other countries. I think I've heard of like 20 different recruiting tech companies coming out in the last two years.
Jed Tabernero [00:04:30] I think the flip side, though, if we think about the erratic movements of the labor market here is that it's never going to be a gradual increase. Like if you are a gradual swing, right. It's always going to be an intense swing. Like whatever recession we've seen, we'll see jobs dip so fast. In turn, unemployment claims will also be rising very fast. Right. So it's it's one of those situations where, yeah, we have an efficient market when it comes to the corporations. They can really adjust quickly. But on the flip side, we won't be able to predict when things are going to look better necessarily in the short term because of how erratic it is right now. Kind of moving on to something also that's a huge a huge driver for the economy as monetary policy. Right. In a recent interview, Jerome Powell, current chair of the Federal Reserve, was seen in a Princeton webcast where he was talking about kind of just what's going to happen in the foreseeable future, what's going to happen to rates. What where does the Federal Reserve lie to comment, especially on the most recent jobs report? Right. So that just came out. And so that's a pretty important metric that the the Fed tracks. And just to retract a little bit. The Fed's main job is to control inflation and to achieve maximum employment. Right. That's the Fed's job. Those are two mandates of the Fed. And so to achieve maximum employment, Powles was pushed on this on as his recent interviews in twenty twenty one and maximum employment is just clearly going to be very hard to achieve at this pace, which means monetary policy will stay relatively consistent with what it is right now. What are we talking about? Low rates. And there's probably still going to be some balance sheet implications where the Fed will will keep buying bonds to make sure that market is liquid enough.
Adrian Grobelny [00:06:43] How much are they doing that on average? The Fed is currently buying at least one hundred twenty billion each month. And these these are short term near-zero rates. That is really just trying to keep the market liquid, trying to ensure that these corporations have funding, have ability to keep their capital reserves sufficient to get through this pandemic.
Shikher Bhandary [00:07:09] So what is the the you mentioned it briefly, but what exactly does buying bonds and just this crazy amount. What does that signify and how does that play in the role of unemployment in general?
Jed Tabernero [00:07:23] Right. So bond market has generally been shitty, right? We can all agree that because interest rates have been low, there's been small yields we're seeing across all across the board for all types of bonds. The issue is that a lot of investment companies, let's say people who have like retirement funds and whatnot for safety because it's a long term asset product. Right. For safety, a lot of these investment firms invest in bonds. Right. What is the issue of the yield now when it comes to bonds? Is that the all the yields for these long term retirement assets, they have a risk of not making money to be able to keep their returns. And these funds are like, fuck, what do I do? Do I stay in bonds or do I go into the equity market, which in some cases they really can't, because that's mandated into what type of investment firms they are that they have to invest in these bonds 10 year that the two year, the 30 year Treasury bonds are supposed to be really safe. It is increasing. I was looking at yields recently and 10 year. Treasury bonds are increasing by at least like two or three basis points, so that's good. It's tiny, but it's good. But the reason why this signifies something great is that the Fed's taking on the risk of these bonds. They're buying these bonds and saying, look, nobody's willing to buy this bullshit right now because it's low, low returns. So we're going to come in, buy it out, keep it on our our balance sheet. But in that case, you're signifying that these bonds are safe. You'll have some back fall, which is that even if bonds are shitty and let's say corporate bonds, which the Fed is also doing, you can feel safe that that the government is going to buy these bonds as they come up. So it's also a fear for companies to say, well, we're not going to issue any more fucking bonds. Nobody's going to buy this shit, you know, therefore, we won't be able to finance ourselves. So financing yourself is also a big piece of this, which a lot of companies will buy corporate bonds or issue corporate bonds. So that's another important piece about why, like buying bonds significant.
Shikher Bhandary [00:09:31] Just side note, it's not nothing to do with unemployment here, but I read a recent article where pension funds, pension funds, just because the yields of the bonds have been so low, these pension funds are like, hey, hang on, we're not getting any returns on this. So they they've been chasing aggressive stuff in your low longing, I don't know, Tesla, all these really risky assets. So it's interesting to see. But coming back a bit to a more serious topic, we saw really high unemployment numbers when Corbett hit almost 14, 15 percent unemployment and we've been doing better. And then. Last month, there was an incredible stat, 140 thousand people lost their jobs, right, but all of them were lost by women as a whole. Which is crazy to think about it, so there's so much disparity in the unemployment numbers that we're seeing the big one year women, then we can dove into that. But one thing to note is your lowest paid workers. So you're like your maids, your cashiers, waiters, anyone more or less that touches the leisure and hospitality industry have really suffered, obviously covid, you know, put a halt on all of that. So that lowest wage segment has seen like 20 percent unemployment. This isn't being talked about at all. And yeah, with with theme parks, gyms, bars closed, there's approximately, what, three point four million jobs lost since covid started. So big, big numbers. The shocking thing is schools are still shut, daycares are closing. So there's a big disparity even in gender. So women largely to do with three sectors. So education, hospitality, retail, very female dominated industries. And they have suffered a lot with the pandemic, which has resulted in this mind blowing stat that women lost all the jobs as a group. Right. I'm not saying that men did not lose jobs in the month of December, but as a group, women lost 140 thousand jobs than men, actually, as a group gained 16000 jobs. So that's that's such a big impediment to what has been really promising trends. Like before the pandemic, there were actually in twenty nineteen. There were actually more women employed than men. So for this to happen at such a crucial junction where women were making decades long progress, gradual but progress nonetheless, and covid quickly changed that
Jed Tabernero [00:12:29] that whole story. You know, as we're thinking about it, covid exposed a lot. And we were talking about this earlier on in twenty twenty covid exposed a lot of inequalities and systematic gaps in our economy to solve. Right. Especially when it comes to who's getting affected by this pandemic. And I think it's really important that we're looking into how this is constructed, because a lot of a lot of the economists that are out there, when they talk about unemployment, it's a bucket, right? Similar to how they talk about inequality. It's buckets like the inequality itself know in this country it's very unequal. This country is very equal. And the disparity is often not really dissect it into which sectors need the most attention. And I think it's important to point that out. That is nuts. That is nuts. How 20 percent like how the unemployment is shocking already as a number right now and what has happened in twenty twenty. And if you dig even deeper, like certain industries are just experiencing a type of unemployment that we had we had just never seen in the fucking past. So this is definitely unprecedented again. Twenty, twenty the year of unprecedented events. Twenty, twenty one. It seems to be continuing. I was hoping for a fucking better start to this year, but. This is really depressing numbers.
Shikher Bhandary [00:13:56] Women have lost record jobs, women of color. Have lost so many more jobs, so when you just keep narrowing the field and you realize, OK, this is actually the wind diagram between women of color and low wage and leisure industries, and that's a whole big Venn diagram that is all within a bigger brain diagram, which is the industries affected by covid.
Adrian Grobelny [00:14:23] It's easy to just see six percent as our current January unemployment rate. But like you both said, dissecting it further. Black black unemployment is nine point nine percent, Hispanic is nine point three and whites six percent. So, you know, dissecting it further really paints a picture of how there's wealth, wealth inequality, how the unskilled markets are affected the most and where where the focus should be. Where where are the people being most affected and are we having policies and really stimulus action that is really helping. The most affected by this
Jed Tabernero [00:15:03] three percentage points higher of an unemployment rate is still jarring because, you know, if we're comparing six percent, six percent is the average unemployment rate for the entire US. Right. So so that means the the Caucasian people in this country are pretty in line with the overall economy's balance. Right. While whilst if you really dig deeper, colored people have three percentage points higher than that just in general. So that's that's an interesting stat.
Adrian Grobelny [00:15:33] You know, this didn't happen overnight. There's a lot of systemic issues that we're not going to dove into, but systemic issues and the way the economy works and the way that our education system is set up, the way, you know, underprivileged groups have not had the same playing cards that other members in wealthy communities have had. And because of all of these issues that we've touched on in the past a little bit due to all of these inequalities and just how the system is not is kind of rigged and not fair. That is why we're seeing these disparities and the unemployment and it really trickles down and starts with education that starts with equal access to resources. So looking back, we ask ourselves, what has the U.S. government done to reduce unemployment? While the previous episode we did break down the Kids Act, which was basically the stimulus package to help address unemployment, help address liquidity issues and make sure that people could continue to live in a time when everything was locked down. There were four major things that the government did to ensure unemployment didn't get out of control, first of which was an employee retention credit, basically allowing businesses to keep employees on payroll while crediting them 50 percent of what they were paying their employees. Secondly, they had a payroll tax deferral designed to defer any and all taxes on payroll for employees. Thirdly, they have payroll support. Basically, the Treasury published resources to help assist businesses in applying for payroll support and continuing to pay employees wages, salaries and benefits. And lastly, they came out with the loan program, which was resources for making loans to provide liquidity to businesses, helping them deal with the losses incurred as a result of these lockdowns nationwide.
Jed Tabernero [00:17:33] So we have a long way to go for a full recovery. Right. If you're looking for the strong labor market, it's likely not going to come at the beginning of twenty, twenty one. Right. We most economists agree that there will be a delayed and gradual recovery, a bounce back. Right. And according to a economic survey put out by Wall Street Journal recently, asking businesses and economists around the world to opine on what the recovery will look like, a lot of them agree that the rollout of vaccines are going to be absolutely fundamental to the recovery of any nation.
Shikher Bhandary [00:18:23] One thing to keep in mind, which which is pretty cool to think about, like credit card debts, I know it does not you might not think it plays a big role, but credit card debts are at all time lows. So people are really paying off their debts during this time and they're saving a lot. So this could eventually, you know, they talk about the Roaring Twenties that happened in the 1920s after the Great Depression. People are talking about the roaring 20s, 20s that will take place from all the savings and all that potential that people want to go out there, travel, spend, which, you know. Brings in all these people that are employed by those industries, so let's hope for something about that.
Jed Tabernero [00:19:07] But why does why does the rollout of the vaccine, why is that the most important driver for how fast the economy will bounce back? Right. Pretty obvious. I feel when you get the vaccine, places that are more vaccinated will be more comfortable being open as an economy.
Shikher Bhandary [00:19:24] You can expect me to be on benders every every weekend,
Jed Tabernero [00:19:30] parties, smallpox,
Shikher Bhandary [00:19:33] helping small businesses with big liquor tabs.
Adrian Grobelny [00:19:37] They're going to be asking for your I.D. and then you need like a little sticker that says I'm vaccinated.
Jed Tabernero [00:19:42] It's pretty obvious after we all get the vaccine, we're going to start spending like fucking crazy. We're going to go to outside labs, fucking EDC, all these big ass.
Shikher Bhandary [00:19:51] You don't even know what happens in those concerts. I don't go to those,
Jed Tabernero [00:19:57] but yeah, I mean, this is pretty obvious why it's going to bring opportunities back, why vaccination is is key in this effort. Right. And because of the nature of how the vaccines has been getting rolled out across just the world, you know, Israel's close to vaccinating 40 percent of their population and probably going to surpass that by now, plan to have their entire population vaccinated before the end of twenty, twenty one, which is pretty fantastic. Right. In contrast, in the US and other European nations, it's very difficult to have a uniform rollout because of the orders to these vaccines and the the countries that they didn't really work towards getting the vaccine and developing it within country and that are just relying on outside companies to provide that vaccine. Right. So there's and then the new strains and shit comes along and whatever. So there is there's a lot of dependency on that. There will be unequal, unequal recoveries across the world. So that's that's pretty certain. At the same time, that'll push the apps. I was talking about people having to show that they're vaccinated and whatever. That's going to be so vital. Right, because some countries are going to be super vaccinated that everybody's good out there. They don't have to worry about the pandemic. So in other countries that it's not and they're exchanging countries from one that is shitty about about rolling out the vaccine and the other one that's not being so shitty. There needs to be a lot of regulation in that. So there will be a push towards that direction where we'll see the entire year just fluctuating on job growth and economic growth
Adrian Grobelny [00:21:22] as we see the numbers of unemployment roll out and pan out for twenty, twenty one. It's important to be wary of what the the numbers represent. Are they representative of all workers and the labor market? And how can we push legislation and push government to really ensure that they create policies that are helping those that are most in need and those that are being the most affected?
Jed Tabernero [00:21:52] Right. So in contrast, right, I'll take us back to 2008, 2009, 2010, right. We saw news stations financing giants that were coming back and making a recovery and largely the the. The environment was was indicative of like, oh, everybody's getting better, everybody's recovering, and and, you know, there's a huge push for financing and the rates are are going slowly, going back up some. Something that was really talked about when the coronavirus first came out, especially from Jerome Powell and his administration and the Federal Reserve, is that there was a forgotten population. There was an entire part of the population that the Fed didn't take into account when it started raising rates, right now, who gets most affected when you start raising rates? It's the people that have crazy debt, right? Because they're reactive to the shifts of the interest rates. What is Jerome Powell saying now? What is the new direction that we're how we're treating this recession versus 2008 recession? Well, the big difference is they've called this out during their policy meetings, right. During the FOMC meeting. Jerome Powell has said directly, we're not going to forget that population anymore. We're going to keep it low until everybody is recovering. Look, I like that, although it's it's really bad for our bond markets. I like that because this reaction towards the interest rates, especially we have debt at an all time high right now. It's ridiculous. And it's growing every time. Right. These people who are going to get affected by these interest rates are going to suffer so much when they start raising interest rates. So I'm glad that we're doing that and I'm glad that that's a change towards monetary policy.
Shikher Bhandary [00:23:51] As we wrap this up, we want to just kind of point out that. There's a lot more than just statistics in Fab, there was Fairborn March right after Corbitt was 15 percent unemployment and now it's six. Definitely an improvement there. But when you look into it deeper, you realize, OK, that's six percent. Like a huge portion of that is just ethnic minorities, just disparities between gender, race and so on. So I think for the folks that, you know, we've had so many business leaders start up founders on our show, I think it's important to note that giving opportunities to those that are within those sectors is kind of important because, you know, I've been in the workplace for how many years now, six, seven years. And you'll be astounded to see how many smart people there are. It's always it's a crazy thing. So, you know, talent is everywhere. It's just that opportunity, sadly, isn't. So being a bit more mindful with the setbacks that's already built into the system for folks that are disadvantaged is very important to identify and maybe act on.
Adrian Grobelny [00:25:15] Now we turn to Biden's plans as there is a transition to new leadership in the White House. What are his plans and how will he address unemployment in the midst of a pandemic? Well, he has some plans that are yet to be approved by Congress, but going over them shed some light into what we can expect from the new leadership. First of all, he plans to increase the federal per week unemployment benefit to make sure that those that are unemployed can stay afloat while they look for new jobs and openings. Secondly, he wants to increase the federal minimum wage to 15 dollars nationwide. Thirdly, he wants to extend the eviction and foreclosure moratorium until the end of September, making the total delays and moratorium's 18 months long since the start in March. And finally, Fed officials have made inclusive employment gains a priority and have adjusted policies to try to make that happen. This new approach will allow inflation to run higher than the central bank's two percent goal, and it will allow the unemployment rate to fall beneath what had been traditionally an indicator of high inflation before the Fed would raise interest rates.
Shikher Bhandary [00:26:34] Hey, thanks so much for listening to our show this week. You could subscribe to us. And if you're feeling generous, well, you could even leave us a review. Trust me, it goes a long, long way. You could also follow THC @Thc_pod on Twitter and LinkedIn. This is things have changed.