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The March jobs report issued Friday by the Labor Department proves two things.
First, it shows how important it is to our nation’s wellbeing that we entered the current coronavirus crisis with a strong labor market.
And second, the report shows that the Trump administration was right to insist on including robust support for small businesses in the $2.2 trillion emergency economic relief package known as the CARES Act that was passed by Congress and signed into law by the president.
According to the Friday report, the U.S. economy shed 701,000 jobs in March, sending the unemployment rate up to 4.4 percent from a 50-year low of 3.5 percent in February.
The March unemployment rates reflect just the preliminary effects of the closing of many businesses to combat the spread of the coronavirus, which causes the respiratory disease COVID-19.
Unfortunately, we know unemployment will go higher before it goes down again. Roughly 10 million workers have filed unemployment claims over just the past two weeks, as businesses all over the country curtailed operations in compliance with stay-at-home orders and the guidelines issued by the White House Coronavirus Task Force.
This means difficult times are ahead for many individuals and families. But shutting down the economy for a short period to save lives and avoid overstressing our medical facilities was the right move.
Now for some good news. While we are heading into rough economic waters, we are heading into them from the strongest labor market in modern history.
Despite losing 701,000 jobs, the U.S. had more jobs in March (almost 151.8 million) than we had just five months ago in October (almost 151.6 million).
In fact, if we had the same number of jobs in October that we just had in March, it would have been the highest number of job recorded since the government began reporting the data and – almost certainly – ever. That matters and will help reduce the pain and the losses we would otherwise have suffered.
A second piece of good news is that the Trump administration anticipated this problem and has worked with Congress to take bipartisan action. On Friday the federal government officially launched the $350 billion Paycheck Protection Program to support America’s small businesses and the tens of millions of workers employed by those firms.
There are more than 30 million businesses with 500 or fewer employees, accounting for over 99 percent of all businesses and nearly half of all employment in the country. Each of those companies – as well as self-employed individuals, freelancers, independent contractors and others – is eligible for government-backed low-interest loans equivalent to 2.5 times their monthly payroll.
Those loans, which come with extremely generous repayment terms, will be crucial to keeping America’s business infrastructure and jobs intact through the coronavirus crisis.
Many small businesses only have enough cash reserves to last for about one month without revenue, so the Paycheck Protection Program loans should be enough to keep even the most financially imperiled companies going until at least the beginning of June.
That leaves plenty of time for Congress to appropriate additional funding should that become necessary. But if we all follow the White House’s social distancing guidelines, we hope it will be possible to begin reopening the economy (at least in most parts of the country) before we reach that point.
More importantly, the Paycheck Protection Program was intentionally structured to ensure that workers are the first to benefit from this financing. While a 1 percent interest rate and a six-month deferral on repayment is a much better deal than businesses could hope to get on their own, there’s an even better offer on the table for entrepreneurs who use the money to take care of their employees: complete loan forgiveness.
As long as business owners spend at least 75 percent of their Paycheck Protection Program loans on wages and benefits for their employees and abstain from laying off workers (which includes rehiring any workers laid off in recent weeks), the low-interest loans automatically turn into grants that never have to be repaid.
Companies can even use up to 25 percent of the money for normal operating expenses, such as rent, mortgage interest and utilities.
This is a true game-changer for companies that until recently faced the very real threat of complete financial ruin as a result of the coronavirus pandemic sweeping across the world.
Even House Speaker Nancy Pelosi, D-Calif. – desperate to regain political relevance after White House negotiators overcame Democratic obstructionism to get the historic $2.2 trillion relief package through Congress – is now saying the Paycheck Protection Program is so critical to our country’s long-term economic health that we need to increase the program’s funding.
The March jobs report is only the tip of the iceberg when it comes to coronavirus-induced job losses – but it’s also a sign that the Trump administration is successfully working with Congress to provide vital assistance to businesses and individuals just in time to keep COVID-19 from sinking the U.S. economy.