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Economists Warn It Is Too Soon To Call Off Federal Aid

MARY LOUISE KELLY, HOST:

Tens of millions of Americans are still out of work even after Friday's better-than-expected jobs report. Many are relying on the supplemental unemployment benefits that are set to expire next month. Congress is wrestling with whether to extend those benefits or provide other support for the economy during what could be a long recovery from the pandemic. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Friday's jobs report was a welcomed surprise for many observers. But encouraging as it is to see some people going back to work, the report also triggered alarm bells. Elise Gould of the left-leaning Economic Policy Institute worries lawmakers might see those 2 1/2 million jobs added in May and forget about the 19 million other jobs that were lost in March and April.

ELISE GOULD: And I am quite concerned that it'll be used as evidence that the economy will somehow magically fix itself. And that's not going to happen.

HORSLEY: James Pethokoukis of the conservative American Enterprise Institute is from the opposite end of the political spectrum, but he agrees Congress should not conclude after one good jobs report the economy is ready to come off life support.

JAMES PETHOKOUKIS: I would pretend that that jobs report never happened. If it in any way is going to influence me to even dabble with the notion of taking the summer off, I think that would be very dangerous.

HORSLEY: While the official unemployment rate dipped in May, it's still above 13%, worse than any other recession since World War II. While some in the Trump administration are predicting a rapid recovery, Pethokoukis points to a new Goldman Sachs forecast, saying unemployment will still be in double digits at the end of this year and well above 7% at the end of next year.

PETHOKOUKIS: So that could be really a year and a half of historically high unemployment. And you're making a powerful case at that point for government action.

HORSLEY: Early on in the pandemic, the federal government did act boldly, authorizing hundreds of billions of dollars in unemployment and other relief to cushion the blow of abrupt stay-at-home owners. Now that those orders are being relaxed, though, Republican Sen. Chuck Grassley says the situation has changed.

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CHUCK GRASSLEY: We need to shift our focus to helping people safely return to work, making sure businesses are able to come back quickly and to put the country back on a path to economic growth.

HORSLEY: At a finance committee hearing this afternoon, Grassley and other Republicans complained the extra $600 a week in unemployment benefits that Congress authorized under the CARES Act is more than many unemployed people made when they were working. Grassley suggests those benefits are discouraging some people from going back to work, and Labor Secretary Eugene Scalia agreed.

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EUGENE SCALIA: I appreciate that members of this committee do not want the CARES benefit to be a deterrent to resuming work. The best thing for workers is work not unemployment.

HORSLEY: Democratic Sen. Ron Wyden of Oregon defended the flat $600 a week payments as a way to move money out the door quickly. Wyden says lawmakers had little choice because the, quote, "Bronze Age computer systems" used by state unemployment offices weren't capable of rapidly matching benefits to workers' old wages. Wyden pressed the labor secretary on whether that capability has improved in recent months. Scalia didn't answer. The secretary was also unable to say how many people are still waiting, in some cases for weeks, for their first unemployment payment.

(SOUNDBITE OF ARCHIVED RECORDING)

SCALIA: I'd just be guessing if I gave you a number. What we do know is that Americans are returning to work in large numbers. That's very good news. But we know...

RON WYDEN: What we know - let me tell you what we know for sure, Mr. Secretary, is that more than 20 million people are out of work now.

HORSLEY: Wyden and his fellow Democrats want to extend the supplemental benefits until the unemployment rate drops to a more normal level. Scalia suggests lawmakers take their time and wait to see how many more jobs might be added this month.

Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.