At first glance, the better-than-expected jobs report for May seemed to improve the outlook for state and local governments, which have been wondering just how hard the coronavirus-related collapse would hit their budgets.

In reality, it may have made it worse.

The 2.5 million jobs added last month went against dire predictions and raised hopes for a quick recovery. As a result, congressional Republicans have soured on passing another stimulus bill.

But the victory lap is coming way too soon. There are still 20 million fewer jobs than in February, and the unemployment rate is still higher than at any point since the Great Depression. There remain fundamental problems with the economy that signal a far-reaching recession.

Any improvement is positive, but even if activity get backs quickly to 90 percent or 95 percent of what it was pre-COVID – which is certainly nothing close to guaranteed – there would still be a massive, pain-inducing hole in the economy.

Congress must act now to fill it, or risk the economy being swamped by a historically bad downturn.

In Maine, we can see how this will play out. The shutting down of so many businesses caused massive job losses. As the businesses that can reopen do so, some of those jobs will immediately come back.

But many won’t, as businesses fail to reopen, or reopen to far less demand and have to ultimately cut jobs. In our massive tourism industry, the best-case forecasts for summer are still grim ones – even if out-of-state visitors come in some numbers, the large events that prop up the industry are gone for a while.

The industry, at least in the foreseeable future, will not be made whole. Neither will many others. As a result, the entire state economy will suffer.

In many other cases, too, we haven’t felt the full impact of the recession. The shutdowns hammered low-wage workers, but many of them have so far been protected by the bonus unemployment insurance program passed by Congress. Initiatives such as the Paycheck Protection Program have also helped businesses survived, but it’s unclear whether they will remain effective.

And the bonus federal unemployment program is set to expire at the end of July. Without it, families will struggle to make ends meet, and the economy will lose a significant source of consumer spending. Congress desperately needs to pass an extension, for the sake of low-income families as well as the economy as a whole.

Any further stimulus must also help local and state budgets. The shutdowns decimated state and local revenues, and a continued recession will only make it worse. Without aid, state and local governments will have to cut positions, which will further harm the economy.

Strings must be taken off the aid so far allocated by Congress so that states and municipalities can use it to replace revenue losses. Additional aid is necessary, too.

The House of Representatives has passed the $3 trillion Heroes Act, which would provide significant aid to states and municipalities. Rep. Chellie Pingree, D-1st District, voted for it, while Rep. Jared Golden, D-2nd District, did not, noting that it had no chance passing the Senate, though he supports state aid.

Sens. Angus King, an  independent, and Susan Collins, a Republican, are backing separate bills that contain aid for local and state budgets.

But Republican leadership in the Senate is cool to more funding, as is the White House. They’d rather wait and see if the economy rebounds enough to make additional aid unnecessary.

More likely is that with every day absent sufficient aid, the recession digs in deeper, ensuring that the downturn will stick around longer – and ultimately hurt more people.

 

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