San José, CA – The broadest measure of unemployment insurance, which includes the regular state unemployment insurance or UI, the federal Pandemic Unemployment Assistance or PUA, the federal Pandemic Emergency Unemployment Compensation or PEUC, as well as the state Extended Benefits or EB rose in the first week of January by 2.3 million people to a total of 18.3 million people. While down from its peak in April, it is still nine times as high as it was a year ago before the recession began, according to the weekly report by the U.S. Department of Labor released on Thursday, January 28.

Part of the bounce in unemployment insurance benefits was because of the temporary end to the federal PUA and PEUC at the end of 2020 as Republicans in the Senate dragged their feet on passing more badly needed aid. The other is the renewed weakness in the economy, as seen in the 140,000 jobs lost in December, the first job loss since April.

This weakness in the economy at the end of the year could also be seen in the first report on the Gross Domestic Product, or GDP, for the fourth quarter, or last three months of the year, which was also released January 28 by the Bureau of Economic Analysis or BEA, which is part of the U.S. Department of Commerce. In the October to December period of 2020, the U.S. economy grew by 1%, which was less than what economists expected.

This meant that the U.S. economy shrank by 3.5% in 2020, the worst showing since 1946 when the economy fell with the end of World War II. While most sectors of the economy grew, although at a much slower pace than in the third quarter or July to September period, state and local government spending fell for the third quarter in the row, the only sector not have a rebound in the second half of the year.

The economic damage of the recession and the pandemic was actually worse in almost all other major capitalist economies, with the United Kingdom the worst with an estimated 8.5% drop in their GDP in 2020. The only exception was South Korea, whose better control of the COVID-19 pandemic and large economic ties with China reduced their economy’s fall to only 1%.

In contrast, the Chinese economy actually grew 2.3%, despite being the first country with a major COVID-19 outbreak. China’s socialist system and its “zero tolerance” policy toward the virus allowed it to suppress the pandemic and have an economy rebound. Socialist Vietnam, which was able to prevent the virus from getting a foothold, did even better, with a 2.9% rate of growth in 2020.

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Hardest hit in December were restaurants and bars, which shed over 370,000 jobs as fear of the rising COVID-19 pandemic, government restrictions and colder weather slammed the sector. State and local government budget cuts also put another 51,000 workers out of their jobs. Local and state governments combined have laid off almost 1.4 million workers this past year, hit hard by the recession and the lack of federal government aid.

While the official unemployment rate stayed the same as in November at 6.7%, this number doesn’t count the millions of workers, mainly women, who have been forced to give up on looking for work and thus are not counted as unemployed. The percentage of jobless workers who are long-term unemployed continued to rise, to almost 40% of the total.

The job situation is likely to worsen in the January report. The survey for the report will be carried out next week, January 11 to 16. Just this past week two new records were made in the United States. On Wednesday, January 6 more than 4000 people died of the COVID-19, and then today there were more than 300,000 new cases in just one day. With the pandemic even worse than when the December survey was taken in mid-December, the job situation is also likely to get work.

But while this latest surge in the wake of the holidays was expected to peak by the end of the month, two recent developments threaten make this bad situation even worse. The vaccine rollout has transformed the Trump administration’s “operation warp-speed” into a vaccination snail’s pace. This is not simply a case of the Trump administration’s incompetence – which it is – but a problem with the decentralized, profit-guided U.S. health care system that has gutted public health starting with the Reagan administration in the 1980s. One deep-blue, well-to-do California County estimated that it would finish the first phase of vaccinating health care workers and institutionalized seniors by the end of February. Given that this is about 7% of the population, it would take 20 months, or until August 2022, to protect 70% of the population that could be enough to crush the virus.

Another problem is the potential spread of a new variant of the virus. Despite more stringent restrictions in Britain than in much of the United States, cases are rising even faster there as the new variant is estimated to be 60-70% more infectious. After a first round of “don’t worry, mutations happen all the time,” it is now coming out that the U.S. is behind most other countries in being able to even test for the new variant, which is spreading in the country from coast to coast.

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The official unemployment rate in the same report did fall from 6.9% in October to 6.7% in November. But this was entirely because of more people giving up or being unable to look for work. The same report showed that there were 326,000 fewer people out of work and looking for work than in October, but this number is less than 400,000 who left the labor force. Thus, the household survey showed 74,000 fewer people working in November than in October.

The day before, on Thursday, December 2, the U.S. Department of Labor reported that new claims for regular state unemployment benefits coming in at 712,000. This is still greater than the record high set before the recession at 695,000 way back in October 1982, and more than three times as high as the pre-recession levels near 200,000. Adding in the weekly new claims for the federal Pandemic Unemployment Assistance or PUA for the self-employed and gig workers, about 1 million people sought government aid in the recession in the latest week.

The total number of people receiving government unemployment benefits across all programs for the week ending November 14 was nearly 20.2 million. For the last seven months, there has never been fewer than 20 million people getting aid, which is more than 12% of the those who are working, or are not working and are looking for work. While new claims have been flattening out at a high level, there was a continued rise in the number of people claiming long-term benefits after their first six months of regular state unemployment benefits run out. The number of people receiving the federal Pandemic Emergency Unemployment Compensation or PEUC and the State Extended Benefits programs rose by almost 140,000 in the latest week reported ending November 14.

More bad news on the economy came earlier in the week, with the report on October income and spending. Personal income sank 0.7% as compared to September. This was mainly due to less government unemployment aid, showing that many people who lost their jobs in April are losing their benefits, as opposed to getting jobs. Personal spending rose, but at less the half the rate of growth as September.

The trade deficit grew again in October after a small drop in September. The October trade deficit was $63.123 billion, more than 70% larger than the trade deficit in February of 2020, when the recession began. In a typical recession the U.S. trade deficit shrinks. For example, from 2008 to 2009 the trade deficit fell by almost 50% from $695 billion to $380 billion.

Weighing on the economy is the surging pandemic, with more than 217,000 new infections a day, a new record high. On December 3, more than 2800 Americans died of COVID-19, another new all-time high, greater previous record of more than 2700 daily deaths set in April. A record of more than 100,000 people are now hospitalized with the coronavirus, straining hospitals across the country. While many field hospitals are being built, the problem is lack of staff, especially those who are trained.

Across the country, state and local governments are imposing more restrictions on businesses in a last-ditch effort to slow the spread. But in Washington, D.C. the White House is planning more holiday parties. Trump’s efforts to deny the pandemic, his egging on dangerous practices, from not wearing a mask to holding large events, has contributed to the world’s greatest death toll for COVID-19, with almost 280,000 Americans dying from the coronavirus. At the same time the Republican leadership of the Senate continue to play hardball, holding up billions of dollars of aid desperately needed by the people. Almost two-thirds of all people collecting unemployment benefits, or more than 13 million people, face a financial cliff in a month. On December 26 the federal PUA and the federal PEUC will stop paying benefits.

The Trump administration is now cooperating to a degree with President-elect Biden in a transition. But they seem to be going out of the way to hurt the economy before the Trump administration ends. Last week, Trump’s Treasury Secretary Stephen Mnuchin ordered the Federal Reserve to return billions of dollars to the Treasury. This money guarantees against any losses from three Federal Reserve lending programs. The Fed’s lending to large corporations, medium size businesses, and state and local governments backed by the Economic Stabilization fund will now have to wind down just as the economy turns down again and pandemic relief programs are coming to an end. So, even though economy has only recovered about half the jobs lost early on, this move objectively limits the Fed's ability to lend.

State and local governments also face hundreds of billions of dollars in budget deficits. They are estimated at $80 billion through June 2021, another $200 billion by June 2022, and another $300 billion by June 2023. State and local government spending is the only major type of spending that did not rebound after plunge in the first half of the year, and looks to be getting worse. These will lead to even more cuts and job losses, especially in public schools and colleges. Many states are considering cuts to Medicaid benefits for low-income households, putting even more people at risk of losing their health insurance after millions have already lost their jobs and employer-provided health insurance.

In addition, the moratorium on evictions and the forbearance of home mortgages are also running out with the new year. According to a survey earlier in November, there are almost 30 million tenants behind on their rent, which could lead to millions of evictions in 2021. Millions of renters are taking a last ditch stand by paying their rent with credit cards, and millions more own back rent and are at risk of eviction in 2021.

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