ARI SHAPIRO, HOST:
President Trump signed some executive actions over the weekend, and we're going to spend this part of the program exploring how much they might do to boost the economy. In a moment, we'll hear from a top White House economist. First, NPR's chief economics correspondent Scott Horsley is here to give us an overview.
SCOTT HORSLEY, BYLINE: Good to be with you, Ari.
SHAPIRO: What's the big picture of what the U.S. economy looks like right now five months into the pandemic?
HORSLEY: Ari, the economy fell into a very deep hole back in March and April. And so far, we have climbed only partway out of it. The U.S. lost more than 22 million payroll jobs in the early months of the pandemic. We have since regained about 9 million jobs, so there's still a long way to go. And the recovery appears to have slowed or even stalled in recent weeks as the virus has picked up steam.
What's more, the very aggressive government support that Congress and the administration authorized early on for the economy has largely been exhausted. And so far, there's been no agreement on how to extend it. That's sort of the backdrop for the actions the president announced over the weekend. And the steps he ordered do provide a modest prop for the economy but less than many forecasters say is needed.
SHAPIRO: Well, stay with us because I want to bring in a voice from the White House. Joe Lavorgna is chief economist for the National Economic Council and special assistant to President Trump, and we appreciate you joining us. Thanks for being here.
JOE LAVORGNA: Thank you. Thank you very much for having me.
SHAPIRO: Let's talk about one of the executive actions President Trump signed, deferring payroll taxes. This benefits people who are working, not the tens of millions who are out of a job. And since it is a deferral, workers or their employers will eventually have to pay those taxes at some point. In your view, why is that what's needed right now?
LAVORGNA: Look; first of all, in terms of the economy slowing, you have to keep in mind that the economy to this point has far-out surpassed consensus expectations. There were many private forecasters who were expecting the unemployment rate to rise to 20%. Of course, it never got there. It rose a lot, but it didn't write (ph) 20, and it has since come down. And if you look at what the market was expecting, we had basically 12 million more jobs in the last three months than what forecasters had expected. So the economy...
SHAPIRO: But what about the concern that this assistance is not targeted for those who need it most, meaning those out of work?
LAVORGNA: No, but I think the point is you have to look at the context. When the market has been surprised - and private forecasters have been so surprised by the economy, it's easy for them to say that we're all just going to weaken after that. So I think the context has to be proper, and that is, there's a lot more work to do, but the numbers have looked much better than anybody thought. In terms of the payroll tax...
SHAPIRO: OK, so - yeah. I mean, this is one of the few areas where Republicans and Democrats in Congress have both opposed the measure. The White House thinks it's the right step. Why?
LAVORGNA: Well, look; it's - what it is it's a broad-based approach. It's not just payroll tax. It's also getting money into workers' pockets through federal unemployment benefits, which are going to go up from where they are now, which is now zero from where they expire. So you can't look at just one thing in isolation. This is a broad package that includes a bunch of different angles. And we believe the payroll tax will be effective in encouraging companies to rehire people back and people going to work. It's a tax cut, and there's a decent chance that maybe that is ultimately forgiven. So I wouldn't want to highlight or isolate just one factor...
SHAPIRO: All right. Well, let's talk about another one then. You mentioned the federal unemployment benefit, which had been $600 a week. That expired. Now, through this executive action, it's $400 a week, a quarter of which is to be paid by states. And, you know, many states have huge budget shortfalls. What do you say to governors who are telling you they don't have the money for this?
LAVORGNA: Well, according to what the inspector general of the Treasury said, there was roughly 80 - sorry, my headset fell off - roughly $80 billion of remaining money. So again, this is just something - in a perfect world, there will be a deal. In the short term, the president is doing what he can to try to get the economy moving in the best way that he possibly can. And I think that's pretty obvious.
SHAPIRO: Under this system, states are also required to set up new systems to pay out this $400 a week benefit. And as you know, many states are struggling to process claims under their existing systems. Are you concerned the money might not quickly get to people in need?
LAVORGNA: Well, I mean, no, because that was the argument back - way back in March, and the money got to people. So no, I don't think that's an issue. No, I think that's a bit misleading.
SHAPIRO: I mean, you say the money got to people. But in many cases, it did take several weeks, and the fund that the president is tapping into only has enough money to last about five weeks. What happens after that?
LAVORGNA: Well, that's by some estimates. I mean, it depends. I mean, look; the president got the CARES Act through literally in record time. It was unanimous. And money went out I believe the first week of April. I mean, we're talking several weeks. This was at lightning speed.
So again, put it into context. There was - we moved very rapidly. And to talk even at the outset about the consumer running out of money, the savings rate in the second quarter was 25%. I mean, some people definitely need more work. There are 16 million people who - 16 million people who are unemployed. That's too high. But we've made a lot of progress. We're making progress, and we need to focus on the positive, and not just everything that's negative.
SHAPIRO: To take a step back, you've predicted a V-shaped economic recovery. The U.S. had almost 50,000 new coronavirus cases just yesterday. Is an economic boom possible when this disease is still out of control in the U.S.?
LAVORGNA: Well, haven't the data shown that? I mean, you've got a housing boom. You've got an auto boom. You've got employment coming back. Cases are high, yes, but they're coming down quite dramatically. Mitigation efforts seem to be working. Retail sales are back above their pre-coronavirus level. We're very optimistic that the numbers we get in July are going to be really good. Why aren't we talking about that?
SHAPIRO: Joe Lavorgna, we appreciate your coming on the program and talking about that with us. Thank you for being here.
He is chief economist for the National Economic Council and special assistant to President Trump. And NPR's Scott Horsley is still with us.
Scott, what stood out to you from what we just heard from Joe Lavorgna?
HORSLEY: Well, Mr. Lavorgna is right that we did see a rebound in the economy more quickly than a lot of forecasters were expected - expecting. We saw job gains in May that a lot of folks didn't think we would see until June because, frankly, the economy did reopen more quickly than a lot of people expected. We may, however, be seeing the ill side effects of that with the surge in coronavirus cases.
And as we've said many times, we are not going to get a sustainable economic recovery in this country until we get a - until we are able to get a handle on this virus. And while some of the economic indicators have been better than some forecasters thought, I think the health metrics have certainly been far worse than most of us feared.
SHAPIRO: And so as we move into late summer and early fall, what economic numbers are you going to be watching to see if there are signs of the U.S. pulling its way out of this historic economic tailspin?
HORSLEY: We are certainly going to be watching those July spending numbers that Mr. Lavorgna mentioned. I think those are out later this week. We'll also, of course, continue to watch, as we always do, job gains. The job gains in July were much lower than they had been in June, and we'll see where that trend goes.
And then we'll also be watching for, you know, measures of economic hardship. We do have more than 30 million people collecting unemployment benefits right now in this country. Those benefits have shrunk a lot in the last couple of weeks. They might get a little boost out of the president's action over the weekend. But we'll be watching for signs of distress, whether it's evictions or late rent payments, missed car payments, missed credit card payments, that sort of thing.
SHAPIRO: That is NPR chief economics correspondent Scott Horsley.
Thanks as always.
HORSLEY: Good to be with you, Ari.
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