United Airlines announced plans to lay off more than one-third of its 95,000 workers. Brooks Brothers, which first opened for business in 1818, filed for bankruptcy. And Bed Bath and Beyond said it will close 200 stores.
Welcome to the recovery.
If there were still hopes of a “V-shaped” comeback from the novel coronavirus shutdown, this past week should have put an end to them. The pandemic shock, which economists once assumed would be only a temporary business interruption, appears instead to be settling into a traditional, self-perpetuating recession.

When states and cities began closing most businesses in March, the idea was to smother the virus and buy time for the medical system to adapt. Jared Kushner, the president’s son-in-law and a senior White House adviser, spoke of hopes “that by July the country’s really rocking again.”

Trump touts June jobs report
President Trump on July 2 said the June employment data “proves that our economy is roaring back” as coronavirus cases continued to rise in the United States. (The Washington Post)
But without a uniform federal strategy, many governors rushed to reopen their economies before bringing the virus under control. Now states such as Florida, California, Texas and Arizona are setting daily records for coronavirus cases and more than 70 percent of the country has either paused or reversed reopening plans, according to Goldman Sachs.
After two surprisingly strong months, the economy could begin shedding jobs again this month and in August, Morgan Stanley warned Friday. Many small businesses that received forgivable government loans have exhausted their funds while some larger companies are starting to thin their payrolls in preparation for a longer-than-expected downturn.
Fresh labor market weakness would represent a profound disappointment for millions of American workers and President Trump, who is eager to highlight economic progress with only a few months remaining before the November election.
“ ‘Stalling’ is the word I’m using,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But the risk there is that the numbers start turning negative again.”

Reopening efforts stall in Houston as covid-19 cases spike
Texas was one of the first states to ease coronavirus lockdown restrictions, but a resurgence of cases has caused reopening efforts to stall. (Whitney Leaming, Alice Li, Spike Johnson/The Washington Post)
Several regional Federal Reserve officials last week expressed concerns about the recovery petering out. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, warned that economic activity “is starting to level off.” Thomas Barkin, who heads the Richmond Fed, cited “air pockets” in new business orders.
At the White House on Friday, however, the president insisted that his plans were on track.
“I created the greatest economy we’ve ever had. And now we’re creating it again,” he said before leaving for Florida.
A day earlier, he told a group of Hispanic leaders he had launched “the fastest economic comeback in history.”
The economy did regain a total of 7.5 million jobs in May and June, faster than many economists anticipated. But that was just one-third of the number lost to the pandemic.
In a worrisome sign, more than two months after states like Georgia lifted their shelter-in-place orders, layoffs are spreading beyond companies that provide services requiring direct human contact. As disruption from the pandemic lingers, this could mean that the job loss is starting to feed on itself in a classic recessionary spiral, economists said.
Harley-Davidson last week said it was eliminating 700 jobs as part of a restructuring plan it described as unrelated to fallout from the pandemic. In April, the company said: “The crisis has provided an opportunity to reevaluate every aspect of our business and strategic plan. We have determined that we need to make significant changes to the company."
Indeed, the pandemic, which marked an abrupt end to a nearly 11-year expansion, is prompting companies to rethink their operations and to trim fat that accumulated while the economy was growing. Wells Fargo, the nation’s fourth-largest bank, is drawing up plans to cut “tens of thousands” of jobs later this year, according to a Bloomberg News report.
“While the timing seems to coincide with the stalling of the economic reopening process in over 30 states, there may well be something more strategic in play — that is, pressure on a growing segment of corporate America to ‘right size’ for what increasingly looks like a longer road back to full economic recovery,” said Mohamed El-Erian, chief economic adviser at Allianz, via email.

Unemployed workers on facing an uncertain future | Voices from the Pandemic
Over 10 million Americans filed for unemployment in March. Here are some of their stories. (Monica Rodman/The Washington Post)
The unemployment rate never reached the Depression-caliber level of 20 percent that many economists had feared in March, topping out so far at 14.7 percent. But layoffs that initially were described as a temporary response to a health crisis are hardening into something more permanent, leaving millions of workers scrambling to regain their footing in a changed economy.
The labor market remains a ruin. First-time claims for unemployment benefits have exceeded the previously unheard of figure of 1 million for 16 consecutive weeks.
Including a new program for freelancers and gig economy workers affected by the pandemic, weekly claims are rising. Almost 33 million Americans now are collecting some form of unemployment benefits, according to Morgan Stanley.
Even allowing for some double-counting in the figures, that means nearly 20 percent of those who were working in February are now jobless, according to economist Julia Coronado, president of Macropolicy Perspectives.
It is no longer a question of returning to the pre-pandemic environment that existed as recently as four months ago, economists said. Under the remorseless influence of the pandemic, the U.S. economy is being reshaped. There will be fewer jobs in airlines, hotels, restaurants and traditional retail and more in e-commerce and technology industries.
Shifting workers from fading industries to the handful that are experiencing rising sales will not happen quickly. During the Great Recession, which began in December 2007, it took nearly 10 years for the unemployment rate to fall back to its 4.4 percent low.
For Levi Strauss, booming online sales were not enough to offset the impact of the closure of most of its retail outlets in March and April. The company said last week it would lay off 700 workers, aiming to trim quarterly expenses by $100 million.
“Businesses have to be conservative and cautious and resize their business for the worst-case scenario of an economy that doesn’t bounce back,” said Coronado. “We’re now seeing the normal recession dynamics we were trying to avoid.”
As the virus has raged longer than first expected, some companies are concluding that they just don’t need as many workers as they did in February, said Heidi Shierholz, former chief economist at the Labor Department.
“These are more of a normal recession layoff. It definitely has a more permanent feel to it,” said Shierholz, now with the Economic Policy Institute.
Employment and spending data suggest the recovery sagged after June 22. The number of people telling government researchers they were not working rose in each of the past two weeks, climbing by more than 1.4 million, according to an experimental Census Bureau survey of American households.
Likewise, consumers appear to have grown more cautious over the same period, according to Jesse Edgerton, an economist with JPMorgan Chase. Citing data from 30 million credit and debit card files, he noted “a modest pullback” in spending across all states, not just those where the virus had flared anew.
“Spending has begun to flatten out at a somewhat lower level than the peak seen on June 22,” Edgerton wrote in a note to clients.
Millions of additional layoffs could come soon from cash-strapped state and local governments, unless Congress provides additional relief, and small businesses that have exhausted their borrowing under the Paycheck Protection Program. In a survey of its members, the National Federation of Independent Business said more than half of respondents had used up their loans and 22 percent planned to lay off workers as a result.
“As owners finish using their loan, more are finding that economic conditions are unable to support current staffing levels which were previously supported by the PPP loan,” the industry group said.
None of this means that the economy is destined to repeat its sickening March plunge. But many economists expect what Rubeela Farooqi of High-Frequency Economics calls a “stop-and-go recovery” that will advance or retreat depending upon public health.
Nowhere is that clearer than in doubts about whether schools will operate normally this fall. The president insists the nation has no choice but to resume instruction for millions of students, both for their benefit and to enable parents to return to their jobs. But with coronavirus cases soaring just weeks before the first bells are scheduled to ring, it is not clear whether that will be practical.
Treasury Secretary Steven Mnuchin said Thursday that he was “highly optimistic” about a coronavirus vaccine by the end of the year. But the economy can’t wait for a cure. Individual and government efforts to blunt the pandemic’s spread must intensify to prevent a deeper or extended downturn, economists said.
“I don’t think any of us think we’ll get the economy back to 100 percent before there’s a medical answer,” said James Glassman, JPMorgan Chase’s head economist for commercial banking. “The longer it goes on, the more damage it does."

“If no action is taken, up to 28 million Americans could be thrown out of their homes by October, according to Benfer. The victims of such a catastrophic social failure will extend well beyond the ranks of the displaced.”

 

This Recession Is a Bigger Housing Crisis Than 2008

By Eric Levitz

Listen to the wall. Photo: Valerie Macon/AFP via Getty Images
The wealthiest country in human history has trouble keeping its people housed, even in good times. In 2017, the United States boasted one of the strongest economies in the world, and nearly half of its tenants were rent burdened. A majority of households in the bottom quintile of our nation’s income distribution give more than 40 percent of their disposable income to landlords each month. Only three other developed countries force their poor to shoulder heavier housing costs.
Graphic: United Nations
In times of crisis, the unaffordability of American housing is exacerbated by our “just in time” socioeconomic model: Steady GDP growth is the duct tape holding together this jerry-rigged social order in which low-income Americans have little to no emergency savings, many basic welfare benefits are contingent on employment, and the threadbare safety is patchy by design. This top-heavy, gold-plated jalopy of a political economy can pass as road safe in fair weather; try to ride it through a once-in-a-century epidemiological storm and it starts to break apart.
Between 2006 and 2014, about 10 million Americans lost their homes to the foreclosure crisis. Today, upwards of 20 million U.S. renters are poised to be evicted between now and September, according to Emily Benfer, the chair of the American Bar Association’s Task Force Committee on Eviction.
At present, the impending flood of evictions is partially dammed by a federal moratorium that covers one-fourth of all renters, the $600 federal unemployment insurance bonus, and the recent dispersion of $1,200 coronavirus relief checks. But even with these protections, a great many renters are being washed out of their homes while millions more accrue onerous debts. Roughly one-third of U.S. households have not made their full housing payments for July, according to a survey by the online retail platform Apartment List. In New York City, one-quarter of all renters haven’t paid their landlords since March.
This is in part because fiscal aid has not reached everyone in need (many state unemployment insurance systems have failed to keep pace with applications; many workers do not qualify for federal unemployment benefits; and others were reliant on informal work), and the federal moratorium on evictions does not cover most renters. But it is also because the federal moratorium doesn’t actually have an enforcement mechanism. Fifteen states have passed legislation requiring landlords to verify that their buildings aren’t covered by the federal ban before seeking to remove their tenants. In all other states, the obligation lies with the tenant, which is to say a renter must verify that their building is covered by the moratorium and prove it in court.
People facing eviction do not generally have much disposable income available to cover legal bills; in fact, many struggle to muster the data or internet connection necessary for attending the videoconference hearings that have taken the place of eviction courts throughout much of the country. A Washington Post account of one embattled renter’s attempt to avert eviction illustrates the pathologies of this process:
Judge Yvonne Williams, glasses snuggled tight to the blue mask covering most of her face, peered into the camera in her Texas courtroom recently to press a renter about the more than $4,000 she owed her landlord.

“What do you have toward the rent?” Williams asked.

The renter appeared on another shaky screen from a dark room and explained that she had been furloughed as the spread of the novel coronavirus shut down much of the U.S. economy. But she had three kids and nowhere to go, the renter said, and was working to raise the money, which included more than $1,000 in late fees.

… During the hearing, the judge was asked whether the renter might be covered by the moratorium, which doesn’t expire until late July. But Williams shrugged off the question. (The Washington Post viewed the hearing online.)

“I am not familiar with that, but if someone will show me the law on that, I will certainly entertain that,” she responded. “Right now, I am going to give them the eviction … as unfortunate as it is.”

According to a search on Fannie Mae’s website, the building is covered by the moratorium.
Absent congressional action, enhanced unemployment benefits will expire at the end of this month, while the federal eviction moratorium will be lifted in the fall. As of this writing, congressional Republicans are committed to reducing unemployment benefits and blocking an extension of existing rental protections.
For their part, House Democrats have passed legislation establishing a $100 billion rental-assistance program, while Senator Elizabeth Warren has proposed expanding the number of households covered by the federal eviction moratorium and extending that ban into March 2021.
If no action is taken, up to 28 million Americans could be thrown out of their homes by October, according to Benfer. The victims of such a catastrophic social failure will extend well beyond the ranks of the displaced. As Bloomberg’s Noah Smith writes:
When a landlord evicts a tenant, they need someone else to move in relatively quickly. If no one does, it means a financial loss for the landlord and an economic loss for the country as a whole because the apartment is going to waste. The time and expense that the evicted tenant has to spend moving to a new place results in an additional economic loss…Units whose tenants are evicted will probably sit empty for many months until the crisis is past, while the evicted low-income people will either crowd in with family or become homeless, increasing the risk of coronavirus spread. This is bad from both an economic and a public-health standpoint.
The fiscal cost of keeping cash-strapped Americans in their homes — and unburdened by back rent — may well be lower than that of allowing them to be thrown onto the streets by the tens of millions. The human costs of the latter, meanwhile, are higher than any decent society could afford.

REALLY A GOOD TIME FOR WIDER OPEN BORDERS AND AMNESTY?