This tendency has not held in recent years because of the substantial decline in interest rates over the past 20 years. The pandemic has driven interest rates even lower, and these lower rates are projected to last through 2034, making the new debt accumulated during this period of crisis relatively cheap. However, rates are slated to rise steadily between 2025 and 2050, in which case government interest payments would grow dramatically. Meanwhile, global food prices have risen sharply in recent months, potentially creating economic and social stress. In the past, sharp swings in food prices often led to politically destabilizing mass protests or a sharp rise in unsustainable government debt when governments attempt to subsidize food costs for consumers. The recent increase in prices is due to several factors, including stockpiling of grain by China, expectations of higher energy prices, expectations that the global hospitality industry will soon recover, and higher freight transportation costs. The rise in food prices and the high level of debts accumulated by many poor countries are factors that might potentially unsettle the emerging world, not only economically but also geopolitically.
It jumped to 16. 7 percent in April 2020 and was still a very high 10. 3 percent in November. The white unemployment rate averaged 3. 3 percent in 2019 and rose to 14. 2 percent in April.
While there has been improvement in the past few months, in October, there still were 11. 1 million unemployed workers and only 6. 7 million job openings and the quits rate was still below where it was in February. In the earlier episode, however, a year after peaking at 2 . 6 percent, the long-term unemployment rate had dropped to 1. 4 percent. It took six years to fall back to that rate in the recent expansion, which it did in June 2015. Black unemployment averaged 6. 1 percent in 2019 and reached an historic low of 5. 4 percent in August 2019.
Meanwhile, the US Congress finally passed and the president signed a spending package of about US$900 billion. It includes extended unemployment insurance, cash for households and businesses, and money for education and medical care.
The short-term demand stimulus from the late-2017 tax cuts and early 2018 spending increases injected additional aggregate demand that complicated the Fed’s task in 2018. The rise in unemployment since February 2020, however , pushed the unemployment rate well above the 10. 8 percent rate reached in late 1982, which itself was the highest since the 1930s. It was a still-high 6. 9 percent in October, but the Bureau of Labor Statistics says the actual rate likely is slightly higher due to misclassification of some workers. Private employment rose by 344, 000 jobs in November but remains 8. 5 million below its February level. Federal government employment fell by 86, 000 reflecting a loss of 93, 000 temporary employees who were conducting the 2020 census); state employment was unchanged; and local employment fell by 13, 000 (putting losses since February at 1. 0 million).
Now, however, the critical questions are how sustainable the incipient recovery will be and what scars the recession may leave on the economy in the longer term. Before COVID-19, a key question was what annual growth rate would be sustainable over time. Most analysts believed that the 2017 tax cuts and additional program funding Congress enacted in early 2018 boosted GDP only temporarily. The Trump Administration projected that growth would continue at about 3 percent in coming years; CBO, in contrast, projected that growth would fall back to under 2 percent over the longer term, as we discuss below in Part III. As noted above, earlier this year, policymakers responded to the pandemic with a series of policies to support businesses, individuals, and public health efforts. These include the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act, and the Paycheck Protection Program and Health Care Enhancement Act. Second, as debt rises as a share of GDP, net interest payments will generally tend to rise relative to the economy as well.