Actual unemployment could be at peak Great Depression levels, say White House advisers

Treasury Secretary Steven Mnuchin warned of “permanent economic damage” if states don’t reopen.

Top Trump administration economic advisers are arguing there is a dire need to reopen the economy quickly to reduce unemployment rates — which they say may be above 20 percent — and to ensure the coronavirus pandemic doesn’t lead to any “permanent economic damage.”

However, their arguments come as public health experts warn that reopening nonessential businesses will surely lead to more Covid-19 cases and deaths.

The Bureau of Labor Statistics reported Friday that the US lost 20.5 million jobs in April. This puts the US unemployment rate at 14.7 percent, a figure worse than any on record since the 1930s. The report, however, represents an undercount, as it doesn’t include the 7 million jobs lost in the final two weeks of the month.

This means the true unemployment rate “could be” around 25 percent, Treasury Secretary Steven Mnuchin told Fox News’s Chris Wallace Sunday morning. Such a figure would mean unemployment is higher than it was at the height of the Great Depression.

Kevin Hassett, President Donald Trump’s senior economic adviser, gave a slightly more optimistic estimate on CNN’s State of the Union Sunday, saying he believes the unemployment rate will probably be “close to 20 percent” in the next report.

Larry Kudlow, director of the Trump administration’s National Economic Council, argued Sunday on ABC’s This Week that buried within the month’s dismal unemployment numbers “is a glimmer of hope.”

“Eighty percent of it was furloughs and temporary layoffs,” Kudlow said. “That, by the way, doesn’t assure that you’ll go back to a job, but it suggests strongly that the cord between the worker and the business is still intact.”

Whether businesses remain intact enough for workers to return to remains to be seen. Many economists have said they believe economic recovery efforts will be slow, but all three White House officials disagreed Sunday. They indicated they expect the economy to bounce back in the second half of the year as states loosen restrictions and people return to work and regular consumption.

Without a massive increase in testing and contract tracing, states will only be able to keep nonessential businesses open if their leaders — and citizens — are willing to take on the public health risks of doing so. But Mnuchin argued the real danger lies in staying shuttered.

“I think there’s a considerable risk of not reopening,” Mnuchin told Wallace. “You’re talking about what would be permanent economic damage to the American public.”

At least 30 states have already begun to shoulder reopening certain segments of their economies. But as Vox’s Matthew Yglesias and Christina Animashaun have explained, it isn’t clear people have the money to engage with these reopened businesses — while it is becoming increasingly clear that lasting damage has already been done:

When people don’t have money, they don’t buy new cars or new appliances. They don’t remodel kitchens or buy restaurant meals. When incomes drop, state and local tax revenue drops, forcing layoffs and furloughs of teachers and firefighters who in turn need to cut back on their spending.

In normal times, the Federal Reserve would try to counteract this by cutting interest rates to a low level and hoping to spark a boom in investment. But the Fed already cut rates all the way down to zero back in March.

Essentially, Americans are in a bind. Stay-at-home guidelines are contributing to record unemployment. But as public health experts have been warning for weeks, reopening too soon is likely to cause another spike in cases, which could overwhelm the health care system, drive the country deeper into recession, and kill many more people.

It’s hard to predict exactly how people will be impacted by reopening, but experts warn a spike in deaths is coming

Epidemiologists have been sounding the alarm that reopening the economy too soon could lead to another wave of cases — in many states, before they’ve recovered from their first wave.

Indeed, 30 states have already reopened their economies — at least partially — and five more are planning to do the same shortly. In Missouri, concert venues and movie theaters are open, as long as people follow social distancing. Customers can dine, if spaced apart, in Georgia restaurants, and some Montana school children have resumed in-person learning.

Most of the states that are reopening haven’t met the criteria outlined by the Trump administration to begin that process. Though it’s ultimately up to state governors to decide when to reengage, the White House’s coronavirus task force recommends states only begin relaxing restrictions on industries when there’s been a downward trajectory of coronavirus cases or positive tests as a percent of total tests for 14 days, there’s a robust testing program in place, and hospitals have a demonstrated capacity to treat all patients.

Of the 30 states that are reopening, most actually have more new cases or a higher percentage of positive tests than two weeks ago, and have recently seen an increase in daily average cases, the New York Times reported Thursday. Even states with a downward trajectory haven’t necessarily quashed their outbreaks.

One of the reasons states may be eager to reopen is that it’s clear what the economic impact has been, and because it’s not always clear what will happen next. Epidemiological models aren’t meant to tell the future, said Jeffrey Shaman, director of the Climate and Health Program at Columbia University, on NBC’s Meet the Press Sunday. Rather, they’re meant to outline what may happen depending on a number of factors. This uncertainty has led to a number of models being incorrect, including — as Vox’s Kelsey Piper has explained — the widely used model created by the University of Washington’s Institute for Health Metrics and Evaluation (IHME), which has been heavily revised following public criticism.

A large part of what adds uncertainty to these models is that they depend on variables based on human behavior, which is hard to predict. For instance, if modelers want to project how many more people will be infected by the coronavirus once stay-at-home restrictions are loosened, they have to guess how much the economy will bounce back. And guessing that requires, for example, assumptions about to what degree bars and restaurants will function normally, and how likely they are to see the sort of traffic they did before the pandemic, as well as how many customers may choose to stay home altogether out of caution.

That’s why it’s “very difficult” to predict exactly what will happen, Shaman said.

“That said, in a lot of the states that are loosening restrictions, they are barely hanging on,” he added. “In some of them, they already have growth of the virus taking place. One would imagine that any loosening of restrictions there is only going to accelerate the growth of the virus.”

Both Shaman and Christopher Murray, director of the IHME, said Sunday that the true effects of reopening will become clear in the next week or two, when those who have been newly exposed begin to show symptoms. Unfortunately, by the time the newly infected are symptomatic, they could have already been spreading the coronavirus to others for some time.

“The big question mark is, will people’s own behavior [to protect themselves in public] be enough to counteract the effects of rising mobility?” Murray said on CBS’s Face the Nation. Georgia, Montana, North and South Dakota, and Minnesota have seen the greatest increases in mobility in recent days, he said, but there are another 10 states with a 10 to 15 percent increase in movement that could become hotspots as well.

“We really are going to have to wait and see. Our suspicion is that there will be, about 10 days from now in these places that have had these big increases in mobility, we are expecting to see a jump in cases.”

And that jump in cases could severely limit the economic recovery the White House advisers believe is coming, leading to — if not “permanent” damage — certainly a long and painful period of high unemployment.

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