This past Friday, the Bureau of Labor Statistics provided a bit of good news for the beleaguered coronavirus economy: Some 1.8 million jobs were added to the economy in July, and the unemployment rate ticked down to 10.2%. Thinking optimistically, an economy with roughly 10% unemployment is a 90% economy — 90% of those in the labor force who want a job have one. Viewed another way, according to payroll data there were 140 million people employed in July. The BLS household survey, which generates the unemployment rate, indicated there were 16.3 million looking for work.
With 140 million working, and with 16.3 million looking, the economy seems to be reknitting itself. Yes, there’s a pulse beat out there. A somewhat unregulated market economy, if left alone, is capable of finding its way during pretty bleak times.
I should emphasize the “unregulated” part of that statement. During these challenging coronavirus times, a host of people seem ready to grab the economy’s elusive steering wheel and have their time as driver. They yearn to exercise political power. Leaving it alone is the difficult challenge to be met by headline-seeking politicians and wannabes. And it’s an election year!
But while this is ongoing, countless ordinary people are figuring out how to make a living, and the result of this effort is what I meant earlier when I referred to the economy knitting back. These are the people who previously ran a restaurant and now operate a food truck or a take-out business. Some are people who worked with diverse service providers that now contract with businesses to provide cleaning and decontamination of premises.
Others who previously worked in offices and managed construction projects are working from home and using drones to provide daily work progress reports. Rather than reknitting, some are knitting a replacement economy from new balls of yarn, while finding ways to get costs down and profits up.
It’s happening all around us, just as the BLS data suggest. It’s stressful and difficult for the majority of people whose livelihoods have changed, but to a degree necessary. When faced with upheaval, making some changes isn’t always a choice. The old law “necessity is the mother of invention” applies in spades. Innovation is often driven by hard times.
As to the current picture, construction activity is getting hot, the real estate market is alive again, manufacturing (especially lumber, textiles, and furniture) is on the rise, and retail sales are making a comeback. Even restaurant bookings are looking better and at a large enough number that many of those hard-hit restaurant workers are back on a payroll. Indeed, folks employed in the hospitality industry made up a significant part of the July employment gains.
Interestingly enough, staying at home seems to be a driver for many people to get into gardening and home improvement. Purveyors of seed are enjoying a hay day, and lumber yards are challenged to keep enough plywood and treated timber on hand to satisfy demand.
Taking a hard look at unemployment claims data indicates that weekly claims peaked at 6.9 million in the week ending March 28 and then fell, hitting 1.5 million claims for the week ending June 20 and stubbornly staying at about that level until Aug. 6, when 1.2 million were filed. The trend is clearly positive. While layoffs remain at a high level — a year ago the weekly average was in the 200,000 range — monthly data on new hires indicate more than 6 million were added to payrolls in May, some 4 million added in April, and 5 million in March.
While the economy is reknitting, it’s still the case that lots of people are longing for better days. There is a lot of suffering going on. The coronavirus is a cruel task master. This is time to give the economy some room to roam, to avoid imposing more restrictions on folks who are trying to rebuild their businesses, and to avoid hitting folks with new taxes, whether they are called tariffs or otherwise. Let’s hope we see a 95% economy by early 2021.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
