The need remains substantial even after last Friday’s unexpectedly strong report from the Labor Department, which showed that the unemployment rate, after peaking in April at 14.7 percent, fell to 8.4 percent in August. This is in contrast to earlier Federal Reserve and Congressional Budget Office forecasts predicting joblessness would still be stuck above 9 percent at the end of the year. What began as a possible second Great Depression now shapes up as a very bad recession — which is bad enough. The U.S. economy still needs 11.5 million jobs to get back to where it was before the coronavirus hit; there are signs that temporary layoffs are mutating into long-term unemployment for workers in some industries.
The jobs report, in other words, was no cause for complacency, of the kind implied by White House economic adviser Larry Kudlow’s breezy remark that the economy could “live with” a failure by Congress to strike a deal, because it is “on a self-sustaining recovery path.” Nor is there a case for going small on a next round of fiscal support, as in the “skinny” deal, reportedly worth about $500 billion, that Senate Majority Leader Mitch McConnell (R-Ky.) is planning to put up for a vote in the Senate. Given the divisions in his party’s ranks — between senators who have coveniently rediscovered fiscal discipline and those who want to run for reelection as supporters of aid — it’s far from clear whether his bill will go anywhere.
At the same time, Democratic leaders must take changing realities into account as they shape their negotiating position. In particular, their insistence on renewing a $600 weekly supplement to unemployment insurance benefits no longer seems justifiable given labor-market conditions and should be modified in favor of other, more pressing objectives, such as aid to state and local governments.
The parties are obviously trying to play this issue for maximum political advantage — the definition of which, however, changes from one day to the next. Given the country’s actual needs, though, the right thing to do — a sizeable package including aid to small businesses, unemployment insurance, nutrition assistance and election funding — is also the expedient thing to do for both Democrats and Republicans. That is what has apparently happened between Ms. Pelosi and Mr. Mnuchin on the need to keep the government funded. The same spirit must prevail on supporting the economy, and soon.