Three indicators reveal the state of the economy : The Indicator from Planet Money As Democrats, Republicans and the President fight about how much support to give laid-off workers during the pandemic, we take the temperature of this up-and-down economy.
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Roller Coaster Economy (Scream Inside Only)

Roller Coaster Economy (Scream Inside Only)

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Hey, everyone. It's Paddy and Cardiff here. This is THE INDICATOR FROM PLANET MONEY.

If you think about it, the path that the economy has followed ever since the coronavirus pandemic hit has been kind of bizarre. It hasn't been like a normal recession, where there's this big decline that can last a year or longer and then a slow and steady recovery until, eventually, the economy grows back to where it was before the recession.

PADDY HIRSCH, BYLINE: But instead, there was this massive initial collapse back in March as the pandemic hit, but then a recovery started almost right away around April and May as a number of states began reopening their economies.

GARCIA: That early recovery was aided by trillions of dollars from the federal government; an injection of money that was approved in legislation that was passed by Congress and the president. But as the pandemic surged again in the early summer, some states were forced to close down parts of their economies again. And that has hampered the recovery while the economy is still in terrible shape - way worse than it was before the pandemic arrived.

HIRSCH: And now, of course, a lot of the money from that earlier legislation has run out, which means that the economic recovery is threatening to stall just as its key support is expiring - great timing. Republicans and Democrats in Congress have been debating what should go into a new stimulus bill, but there's no deal in sight.

GARCIA: Yeah. And meanwhile, over the weekend, President Trump announced a series of executive actions to unilaterally - without Congress - try to get certain financial benefits to households. But the constitutionality of those actions has been questioned by both Republicans and Democrats in Congress. And in any case, these actions would not do nearly as much as another bill from Congress could. So today on the show, we are presenting three new indicators that tell the story of this bizarre recovery and which also show just how much the recovery has depended on the federal government's help and what might happen to the economy if Congress does not arrive at a deal soon and that support is not reinforced.


GARCIA: Today's first indicator comes from Daniel Alpert. Dan is a senior fellow at Cornell University. And with the help of a polling company called RIWI, he did a big survey of about 6,000 randomly chosen people in the U.S. And one of the things they wanted to know was the effect of a government program called the Payroll Protection Program, also known as PPP.

HIRSCH: The PPP was part of the big stimulus bill passed in March, and it allowed small businesses to borrow money through bank loans that were guaranteed by the federal government. If the businesses used most of the money they borrowed under the program to keep paying their workers, then they wouldn't have to pay the money back. That was the deal. The loans would be forgiven.

GARCIA: And so as the money started going out in April and May, Dan says, the program seemed to be working.

DANIEL ALPERT: One of the things that was very clear to us after a while was that the Payroll Protection Program was, in fact, working as it should have been. Employers were repayrolling (ph) their workers. Many of them were not calling their workers actually back to work. They were just paying them in order to obtain loan forgiveness under the PPP program.

GARCIA: But the PPP only provided loans to businesses that would cover roughly eight weeks of payroll costs. And so as time went on, that money started running out.

HIRSCH: So the survey asked workers who were laid off early in the pandemic and then rehired whether or not they'd been able to keep their jobs.

ALPERT: And that's really where the numbers started to scare us because 31% of the people who were rehired by their employers and being paid again for a period of time were again laid off.

GARCIA: That is our first indicator - 31% of people who had been rehired by their employers were laid off a second time.

HIRSCH: That is brutal.

GARCIA: It's quite a figure. I mean, if you think about it, it means that about a third of people who had been laid off and then rehired were then laid off again. It's really astonishing. And also, the PPP program just expired. So if either the economy does not start improving again or these small businesses don't get more help from the government, there could be even more layoffs to come.

HIRSCH: Moving on now to our second indicator - it comes from Matt Klein. Matt is the economics commentator at Barron's and the co-author of "Trade Wars Are Class Wars." Now, Matt was interested in calculating how much the money from both the Payroll Protection Program, the PPP, and from the expansion of unemployment benefits had actually helped workers.

GARCIA: Yeah. As a reminder, the government increased unemployment benefits by $600 a week as part of the same stimulus bill that also included the PPP. And specifically, Matt estimated how much those two programs were boosting the amount of money that workers, including unemployed workers, were getting each month. And here's what Matt found.

MATT KLEIN: So in June, total labor income was $980 billion. It would have been only $903 billion dollars if it hadn't been for these two government programs.

GARCIA: Or to put that another way, workers overall and also people who had been working but were laid off - they were getting 9% more money than if these programs had not existed. And, of course, that 9% was mainly concentrated in people who really needed the money - the unemployed. So that is our second indicator - 9%. And as a share of the economy, that is actually a huge amount of income support. But just like the PPP, the expanded unemployment benefits have also just run out. And this has Matt worried about what's going to happen to all those people who were receiving them.

KLEIN: If you didn't add the $600, then the average person getting unemployment insurance would only be getting about $300 a week. There's a lot of variation across states but, on average, about $300 a week. Now, $300 a week is basically impossible to live on. The extra $600 is the difference between being impoverished and not living well but at least living, you know, reasonably well and being able to sustain yourself in a reasonable way.

HIRSCH: And our third indicator comes from Heather Boushey. She's an economist and the president and CEO of The Washington Center for Equitable Growth. If that sounds like a think tank, you'd be right. It's a think tank. And Heather's indicator is about state and local governments.

GARCIA: Yeah. The indicator is actually a ratio. And here it is. As the economy gets worse, for every one single percentage point that the unemployment rate goes up, you can expect the money that state governments collect in taxes to go down by almost 4%.

HIRSCH: And right now the unemployment rate's about six percentage points higher than it was back in February before the pandemic hit, which means state governments could be facing declines in their tax revenues of, perhaps, 20- to 25%.

GARCIA: And a similar dynamic also applies to local governments, like city governments. The economy gets worse. There's less money to tax, so they collect less money, all of which means that state and local governments are going to have to lay off some of the millions of public-school teachers and firefighters and police and sanitation workers that they employ. And not only are these workers going to lose their jobs, they also will not be able to provide services at exactly the time when people are actually relying on them even more than they were before the pandemic, Heather says.

HEATHER BOUSHEY: So you think about schools, which are having trouble reopening this fall. Well, for those places that do reopen and for those places that don't, it's going to take extra time and resources for those teachers to figure out how to do new lesson plans online or to figure out how to, you know, have children safely in the classroom. All that's going to take more resources, and yet, states are experiencing the need to cut back.

HIRSCH: Without more money, the state and local governments will be facing combined shortfalls in the hundreds of billions of dollars. And in addition to layoffs, these governments may also try other ways of rebalancing their books. Heather points out that's exactly what they did after the Great Recession of 2008.

BOUSHEY: And that decline in revenue at the states meant that they make college more expensive, and they cut back on the aid. So there are real consequences to this indicator for not just little kids but also for all those kids who are, you know, doing school at home right now for high school and college. They're going to have to pay more for it, most likely.

GARCIA: So there you have it - three new indicators for the strange and difficult economic times we are living in.


GARCIA: We're going to post details of each of these indicators in the show notes at

This episode of THE INDICATOR was produced by Darian Woods and fact-checked by Brittany Cronin. THE INDICATOR's editor - when he's not co-hosting - is Paddy Hirsch. THE INDICATOR is a production of NPR.


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