Home sales are booming. Shares set record highs. Industrial production is climbing out of the ditch into which it fell earlier this year.
And yet, the U.S. economy is nowhere near recovering from the health it achieved, with low unemployment, consumers spending free and thriving travel, before the coronavirus paralyzed the country in March. Not while the viral outbreak is still raging and Congress remains deadlocked over giving more relief to tens of millions of people who have been thrown out of work and to state and local governments whose revenues have disappeared.
Every week, roughly 1 million new Americans apply for job opportunities – a depth of job insecurity that is not seen in a single week in the depths of the Great Recession of 2007-2009.
Economists say so many businesses have reopened and consumers have started shopping and spending more, the image is starting to brighten up, if appropriate. Most say the economy is growing again. However, scars will remain certain from the catastrophic quarter of April-June, when the government, according to the government, collapsed with an annual rate of 31.7% – by far the worst quarterly contraction since such a record high began in 1947.
Some industries, especially those dealing with travel and hotels and restaurants, could struggle for years. And although the number of confirmed viral infections has decreased, the threat of a major outbreak remains, especially as students increasingly return to schools and colleges. The consumers whose spending drives most of the economy and the economists who analyze it are certainly downbeat about the prospects for a return to prosperity.
“As long as we continue to see inflation of infections, disruptions to activity – especially in sectors exposed to social distancing rules – will continue,” said Rubeela Farooqi, chief economist at High Frequency Economics. “The risk of business failure due to repeated closures is high, and the chance of permanent job losses increases with each successive closure which could result in permanent damage to the labor market and the economy.”
The Conference Board, a business research group, reported this week that consumer confidence has fallen to its lowest level since 2014.
And in research results released this week by the National Association of Business Economics, two-thirds of surveyed economists said they thought the U.S. economy was in recession. Nearly half said they did not expect it to return to pre-pandemic levels by mid-2022. Eighty percent set the chance that any recovery will give way to a “double-dip” recession at 25% or more.
Earlier this spring, the economy went into freefall when millions of businesses suddenly closed and consumers stayed home to prevent infection. Employers cut more than 22 million jobs in March and April – far from a record total.
Since then, the labor market and economy have recovered as businesses have slowly reopened. Federal Reserve efforts to keep interest rates ultra-low have helped boost a record-breaking binge in the stock market. Home sales have risen sharply due to super-low mortgage rates and rising demand. And a revival in car production has lifted the American industry.
Altogether, employers added nearly 9.3 million jobs in May, June and July. Still, that hiring has replaced just 42% of jobs in March and April. More than 27 million people still receive some form of unemployment assistance.
Moreover, a summer resurgence of confirmed COVID cases in the South and West forced many companies to close again in July. The data company Womply reports that company closures have mostly stabilized over the past four weeks. Still, 70% of bars in Texas and 71% of health and beauty stores in California were closed by mid-August, Womply found.
Following the adoption of a massive financial rescue package in March, Congress Republicans and Democrats are unanimous in agreeing to allocate more aid to the unemployed and to warring states and locations. Expiring a $ 600-a-week federal unemployment benefit – a lifeline to help the unemployed survive the crisis – leaves many families desperate.
“My income has basically been cut in half,” said Taylor Love, a 34-year-old unemployed massage therapist in Austin, Texas. “Paying our mortgage is becoming a struggle. We will have to dip into whatever small savings we have. “
On August 8, President Donald Trump signed an executive order offering an elusive version of the extended unemployment benefits. At least 39 states have accepted or said they would apply for federal subsidies that could increase their weekly benefits by $ 300 or $ 400. But questions remain about how quickly that money actually gets in people or how long it takes.
In a question-and-answer session following a speech Thursday, Fed Chairman Jerome Powell said that “if we can keep the disease under control, the economy can improve fairly quickly.” But he warned that sectors of the economy hardest hit, particularly travel and tourism, would take longer to recover.
“That’s a lot of workers – we need to support them,” Powell said.
