Recovery stalls in July, Federal inaction could make August even worse

RALEIGH (August 21, 2020) — The pace of recovery slowed dramatically in July and, with supplemental federal Unemployment Insurance (UI) benefits expiring, August is likely to be even more difficult for people who have lost their livelihoods during the COVID-19 crisis.

“We’re headed for even more economic harm if Congress doesn’t extend the supplementary Unemployment Insurance benefits that expired at the end of July,” said Alexandra Sirota, Director of the Budget & Tax Center, a project of the NC Justice Center. “Initial UI claims increased week-over-week by 15 percent for the week ending August 15th, and jobless claims are 450 percent higher than the same time last year.”

Data released by the U.S. Department of Labor yesterday show that UI is delivering critical support to households in North Carolina and across the country, with more than 1 million people claiming UI since the pandemic began.

Research into the economic effects of the loss of the $600 per week boost in UI provided under the federal program shows that North Carolina is losing roughly $350 million each week in income for the state’s economy, and jobless workers would see a 70 percent reduction in wage replacement that would push more people into economic hardship.

“The recovery is stalling and we haven’t even recovered half of the jobs that have been lost since the pandemic started,” said Patrick McHugh, Research Manager with the Budget & Tax Center. “With the U.S. Senate and Trump Administration blocking the assistance people and communities need, we’re at real risk of a long and painful recession.”

Economic challenges facing North Carolina include:

• Job growth slowed dramatically while still nowhere near full recovery: After June saw nearly 170,000 jobs recovered, a much more modest 57,200 jobs were added in July. Thus far, less than half of the jobs lost in March and April have been recovered, and North Carolina is still 325,700 jobs short of where we were before the COVID-19 outbreak.
  
• Data indicate more job losses are becoming permanent: Initial hopes that most job losses in March and April would be temporary furloughs have not yet been realized. The number of North Carolinians looking for work increased by over 60,000 from June to July and the headline unemployment rate increased by 1 percentage point. While it’s too soon to say with any certainty, these data, combined with national figures showing more of the job losses have become permanent, make it increasingly likely people will experience longer-term joblessness during the COVID-19 recession.
  
• A historically low share of North Carolinians are working: The headline rate only captures people who are actively looking for work, so it won’t reveal the true extent of job and income losses for North Carolina families. Only 53.9 percent of North Carolinians were working in July, down from over 59 percent before the COVID-19 outbreak and far below levels that were common throughout most of the 1990s and 2000s.

For charts showing the most recent labor data and COVID-19 job data, visit the Budget & Tax Center’s Labor Market page at www.ncjustice.org/labormarket.

For more context on the economic choices facing North Carolina, check out the Budget & Tax Center’s Prosperity Watch report.

The nonpartisan Budget & Tax Center is a project of the NC Justice Center, which works to eliminate poverty in North Carolina by ensuring every household in the state has access to the resources, services and fair treatment it needs to achieve economic security.

FOR MORE INFORMATION, CONTACT Patrick McHugh, Budget & Tax Center Research Manager, at patrick.mchugh@ncjustice.org or 919-856-2183.