April Jobs Report: Economy Booming - Thank Uncle Sam
With almost every state fully reopened or announced when it will be, business activity is up sharply throughout the U.S. Manufacturing and non-manufacturing are exceeding the pace observed before the pandemic struck. There is strong demand for commodities, big ticket items, computers, and other durable goods. Construction picked up in March, driven by residential building. The service sector is pulling out of the doldrums as millions of adults get vaccinated.
The federal government’s massive spending is driving the recovery: the $2.1 trillion CARES ACT enacted in March of 2020, the $900 billion stimulus package enacted in November 2020; and the Biden administration’s $ 2.1 trillion American Rescue Plan enacted in April, 2021. The Federal Reserve Bank lowered the federal funds rate to 0.25 %, created 13 credit facilities, and is purchasing $80 billion in Treasuries, and $ 40 billion in mortgage-backed securities a month to support business liquidity. The Fed announced that the accommodationist policy would continue until inflation reaches the long-term goal of 2.0 %.
The fiscal and monetary policies are projected to sustain consumer spending and business investment at a high level through 2021, setting the stage for steady, balanced growth. GDP should grow about 6.4% in the second quarter, exceeding the growth rate in early 2021. Growth should continue at a rapid pace through 2021 and through 2022 until fiscal and monetary policy begins to peter out.
Producer prices might see a short-term spike as supply chain costs rise to meet increased aggregate demand, but a structural rise in inflation is not expected.
The boom in business activity should generate strong employment growth, including the hospitality and leisure industry that was hardest hit by the pandemic. Job creation should be high in the second quarter continuing through the year. Strong employment growth should not only generate wage and salary increases but also draw laid off and discouraged workers back into the labor market.
But there is a long way to go. At this writing, there are still 13 million jobless victims of the pandemic.
The good economic news should not mask the impact of the pandemic on racial economic disparities. Black and Hispanic workers lost jobs at a higher rate than white workers and Black and Hispanic businesses did not benefit as much from government emergency assistance. Black women in particular lost jobs and hours of work because of childcare obligations when schools closed. The Biden administration Family proposal would help address the problem, but the proposal faces strong Republican opposition in Congress. There’s no time for delay; Black and Hispanic economic conditions are worsening.
A Federal Reserve survey revealed the disproportionate impact of the pandemic on Black and Hispanic businesses. Sales declines were reported by 86% and 85% of Black and Hispanic owned firms respectively in 2020 while 79% of white-owned firms reported a decrease in sales. Moreover, 77 % of Black-owned firms reported that their financial condition was poor or fair, while 54% of white-owned firms reported similar conditions.
The Paycheck Protection Program, PPP, that was developed to minimize layoffs in small businesses had a racially disparate impact. Only 61% of Black-owned firms applied for a PPP loan and only 43% of such firms received all the funding they sought. Black-owned firms were five times as likely as white-owned firms to receive none of the PPP funding for which they applied (20% vs. 4%).
This evidence shows the continuing racial disparity in the implementation of public policies designed to address economic crises. Similar disparities were common during the government’s response to the Great Depression. The more things change, the more they remain the same. With all that’s being done to revive the economy following the pandemic, Black Americans remain locked in the caboose of the train.