Former Fed Chair Janet Yellen Hopes Economic Recovery Doesn't Come Up Short
There was some good financial news Monday afternoon for everyone who isn't yet dead from COVID. The Dow was up 1,200 points with defense contractor Raytheon Technologies and American Express taking the lead. The S&P 500 and the Nasdaq shot up at 5.6 percent and 5.4 percent respectively. Investors are optimistic that the coronavirus outbreak is stabilizing. Putting this in terms that poor folks can understand: We're back, baby!
Well, not so fast, says former Federal Reserve chair Janet Yellen, who Donald Trump believed was “too short" for the job. (Yeah, really.) Yellen told CNBC's Sara Eisen that everything's coming up shit. Haven't we noticed all those people without jobs? The economy is in the midst of an “absolutely shocking" downturn.
YELLEN: If we had a timely unemployment statistic, the unemployment rate probably would be up to 12 or 13 percent at this point and moving higher.
OK, fine, lady, we'll put away the Cristal. We kinda figured that 10 million newly unemployed people in just two weeks was the kind of bad news that lingers. Yellen said that overall economic activity has decreased dramatically, commensurate with the government confining everyone to the homes for their own safety. She believes the second quarter will show that gross domestic product shrank about 30 percent. It's gone from Christian Bale in Batman Begins to Christian Bale in The Machinist.
The annual budget deficit might reach $2 trillion, and unemployment “may go to depression levels," Yellen said, but she thinks this current economic collapse is different from the Great Depression Classic when people weren't afraid to leave their homes.
YELLEN: This is a huge, unprecedented, devastating hit, and my hope is that we will get back to business as quickly as possible.
Uh ... sure. Eisen asked Yellen if she thought that recovery could look like a “V or a U." This is all very “Sesame Street" to me. I was a journalism major, so I looked it up: In a “V"-shaped recession, "the economy suffers a sharp but brief period of economic decline with a clearly defined trough, followed by a strong recovery." Yeah! Let's go “V"!
YELLEN: A “V," which is what we're all hoping for, is a best-case scenario. If activity was able to resume in June and we'd be back to something more normal by summer, I think a “V" is possible, but I am worried that the outcome would be worse.
Yellen is rightly concerned about how much damage is done during the time the economy's closed like Wally World. The whole point of the stimulus package was to put the economy in suspended animation so it wouldn't rot. The “Payroll Protection Program" was supposed to help businesses keep the lights on (metaphorically, if they're a nonessential business, the lights need to stay off) during the crisis. The enhanced unemployment benefits would keep the jobless housed and fed until they could return to work.
Unfortunately, the Trump administration released guidance about the new pandemic unemployment assistance (PUA) program and it's a shit show.
The Trump-Scalia Dept of Labor released new regulatory guidance for the new pandemic #unemployment assistance (PUA)… https://t.co/DnJ37MmrjU— AndrewStettner (@AndrewStettner)1586185271.0
While PUA will cover those who are caring for a child while school is closed due to #COVID19, that coverage could e… https://t.co/VCpnTelKK2— AndrewStettner (@AndrewStettner)1586185272.0
The end result of the Trump administration’s guidance on PUA is that workers who are suffering economically may unn… https://t.co/UHEOmd5OBF— AndrewStettner (@AndrewStettner)1586185274.0
It's weird to see guidance regarding workers literally diagnosed with the coronavirus, as testing isn't easy to acquire. You can be too sick to work but (fortunately) not sick enough to be hospitalized. It's repulsive to put up all these hoops when it's obvious that COVID is directly responsible for anyone claiming unemployment now. You literally can't leave the house in most states unless your business is deemed “essential." And although essential workers deserve hazard pay and then some, it's also OK for some of those workers to choose not to put themselves or their families at risk. They should still qualify for assistance.
This sort of punitive short-sightedness also makes “returning to normal" harder. It's not just rich people who keep the economic engine running.
YELLEN: If households have run down their savings and had to dip into retirement savings or are behind on their bills and have higher debt ... their spending patterns aren't likely to go back to what they were.
This could lead to a “U-shaped" recovery, which is a sharp downturn followed by a slow and gradual rebound.
YELLEN: And there are worse letters, like “L" and I hope we don't see something like that.
The “L-shaped" recovery is tortoise-paced. That's what economists feared would happen after the housing bubble burst but we managed to bounce back. Thanks, Obama! Unfortunately, Donald Trump is at the helm now, so good luck, Biden?
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Stephen Robinson is a writer and social kibbitzer based in Portland, Oregon. He writes reviews for the A.V. Club and make believe for Cafe Nordo, an immersive theatre space in Seattle. He's also on the board of the Portland Playhouse theatre. His son describes him as a “play typer guy."