What does the shocking unemployment report really mean?

The suppression-depression frame brings today’s bewildering report into sharper focus. “In April we lost 20 million jobs, and in May, 2.5 million of those jobs were suddenly recalled,” Wolfers said. “That tells you that at least one-eighth of the economic crisis is the mechanical unwinding of the suppression. That means it’s not long-term damage.”

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Which is great news. But that’s just one month. And the distinction between suppression and recession will be at the heart of every conversation about the U.S. economy for the rest of the year. Take, for example, the popular debate about whether the road back to normal will be shaped like a V—a sharp decline followed by a sharp recovery—or a swoosh—a sharp decline followed by a slow recovery. “If we get a V-shaped recovery, that tells you that the down was almost all suppression and that you really can turn economies on and off just like that,” Wolfers said. “But recessions in recent economic history are swoosh-shaped.”

What nobody—not Wolfers, not other economists, and certainly not I—knows is whether this is a dead-cat bounce or the beginning of a glorious summer of economic recovery.

And that’s why Friday’s good news could prove dangerous. When the pandemic posed a fresh existential threat to the country, Washington broke its habit of indolence by passing a multitrillion-dollar economic-relief bill. This month’s reversal may encourage the government to dither.

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