THE U.S. economy grew at a galloping 33.1 percent annualized rate in the three-month period ending Sept. 30, which is great news for workers and businesses. It’s especially heartening in light of an accompanying report that new jobless claims declined by 40,000 in the week ending Oct. 24, to 751,000, the lowest level since March 14, when coronavirus-related lockdowns were about to begin.
Now for the context: The U.S. economy is still in a very deep hole, yet necessary measures to help dig it out are stalled in Congress. They are probably not going to be approved until after the election next week, quite possibly weeks after. What’s more, the root cause of the economic disaster, the coronavirus, is raging out of control both here and in Europe, a major engine of global growth where new partial lockdowns are being enacted.
Last quarter’s economic surge followed a plunge of 31.4 percent (on an annualized basis) in the previous quarter; the net effect is that U.S. economic output is still 3.5 percent smaller than it was in the last quarter of 2019, according to economist Ian Shepherdson of Pantheon Macroeconomics. Of the 22 million jobs lost during the covid-19-related crash, about half have returned — but the other half may be harder to recover, because joblessness in restaurants and hotels remains stubbornly high, while layoffs continue at large companies such as Boeing and Exxon. Meanwhile, women are exiting the labor force at a faster rate than men, reflecting the lack of child-care options and the concentration of job losses in sectors, such as state and local government, that frequently hire women. A substantial number of tenants are behind on their rent, with an eviction moratorium slated to expire at the end of the year.
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The newly documented recovery is the latest testament to the efficacy of the bipartisan fiscal support measures adopted in March. The driving force behind it was consumption, which rose 40.7 percent, in large part because of ramped-up unemployment benefits and direct cash payments provided by the March package. Both have expired, raising the possibility that the economy will run out of steam again, especially if states and localities must respond to the current coronavirus wave by curtailing activity again. No matter the result on Tuesday, Congress and the president must respond, sooner rather than later. A crucial component of any package will be appropriate help to state and local governments, lest they be forced to balance budgets by raising taxes and laying off workers.
President Trump, not surprisingly, is taking credit for the good economic news, the flip side of his refusal to take responsibility for bad reports in the past — and for the current dismal coronavirus numbers. Discerning voters will see through that last-minute political spin to the reality, which is that there is no way out of the crisis without a reliable, steady commitment of federal resources and attention — that is, exactly the kind of leadership that Mr. Trump has failed to provide.