Somewhere in Wrigley Field, a nacho carton skitters along the aisle between the stands, pushed by a light wind. It could be the most activity this stadium sees all season. Across America, concession line cooks and cashiers are out of work. The hospitality industry has been devastated, along with restaurants, retail, construction, and education. According to CNN, 1 in 4 American workers have filed for unemployment since March.
Most of America feels like an empty stadium right now. When will isolation end? How will it end? How long will it take to get the economy back up and running?
When, exactly, will all the jobs come back?
A Season or a Decade
We’ve rebounded from plagues before. The problem is, we’re rusty.
“Even though the novel coronavirus has (so far) boosted mortality rates far less than the 1918-1919 flu epidemic, it has done so in an environment in which very few adults can remember mortality rates like the ones experienced by children and adults back in the early 20th century,” says Gary Burtless, Ph.D., Senior Fellow in Economic Studies at the Brookings Institute.
Even though COVID-19’s casualty count is much lower than the Spanish influenza, its economic impact is much larger. Burtless postulates the reason for this is that the economy of the early twentieth century was just far more accustomed to death. He says that the workforce of 1918-1919 would have self-quarantined for a few weeks and then got right back to work. “We are used to extremely low rates of death from infectious disease, so the shock of the COVID-19 pandemic represents a much greater threat to our way of life than it would have seemed to adults in the first decades of the 20th century.”
So when does our way of life get to rebound? Jose Barrero, Ph.D., Assistant Professor of Finance at Instituto Tecnológico Autónomo de México and coauthor of “COVID-19 Is Also a Reallocation Shock” said that the more pessimistic outlooks of the experts his team surveyed believed an economic downturn could last into 2022, which tracks with current theories that the rebound of the American economy will take on what’s being called the Nike Swoosh projection – meaning recovery could sputter slowly upward over multiple quarters.
How soon the jobs come back depends on how well we can control the spread of COVID-19. With stay-at-home orders that vary in intensity by state, rampant reopening protests, and a seemingly boredom-born disregard for observing what few restrictions the nation set in place, the return of the American job market hinges somewhat ironically upon people staying at home.
“Most of us economists think that if the risk of infection sank quickly, as it did in Australia and New Zealand, and if it could then be kept low, there’s a good chance the economy would rebound quickly and unemployment would start to fall pretty rapidly,” says Burtless. “On the other hand, the longer that we think we have to shelter at home and stay away from strangers and work colleagues, the slower the recovery will be.”
Staying at home longer draws out our recovery timeline, yes. But rushing to reopen carries the spectre of a second wave we won’t be strong enough to handle. “Many small business owners are burning through their savings trying to keep their business alive,” says Blake Stockton, a small business specialist at FitSmallBusiness. “Most won’t have any money to withstand a second sustained lockdown.”
Adds Barrero, “The longer we fail to control the virus, the higher the chance there will be permanent damage to the economy, as more small and medium businesses fail, more people become unemployed and struggle to survive. Even when we do control the virus, the structure of the economy may have changed radically, which will likely lead to a slow recovery.”
Learning From the Past
That slow recovery could take a few different forms. Some have asserted that the Great Depression bailout might be worth revisiting. Shirshikov believes that a large-scale infrastructure project could truncate our recovery time to around a year, if it employed enough people. “There is a very high likelihood of public works infrastructure projects,” he said. “With failing roads and bridges, a lack of high-speed rail options, and other infrastructure opportunities, this may be the perfect time to engage in these kinds of projects. It’s also a solution that addresses employment and economic recovery swiftly.”
Burtless concurs. “If the economy remains weak as a result of lagging demand in a recovery from the COVID-19 slump, I would strongly favor a large and sustained public sector infrastructure campaign… Such a program would do a great deal of good, both in speeding the recovery and in improving our present day standard of living.” But Burtless cautions us to remember that the success of post-Depression public projects didn’t occur in a vacuum. “The Great Depression only ended in the U.S. as a result of the boost in demand associated with World War II.”
Short of another wartime ramp-up, there may also be partisan blockades to a New Deal-type infrastructure project launching in the wake of COVID-19. Burtless pointed out the GOP has a history of resisting infrastructure projects of this scale.
Reopening vs. Reallocation
The first signs of life will likely come from restaurants and assorted hospitality reopenings. But just because the doors are open doesn’t mean we’re home free. Even if restaurants get creative about social distancing, Stockton warns “the limited-capacity seating will eventually devastate the industry. The average restaurant operates at a 5% margin and most businesses simply cannot sustain the hit to revenue from limited capacity.”
Until there’s a proven vaccine for COVID-19, a lot of us want to be where the people aren’t. While that attitude is great for self-preservation, it’s a behavior that could plateau any early successes of staggered reopenings.
Stockton says we can expect a possible drop in unemployment as the doors begin to open, but that reopening alone isn’t the only answer. “Over the next few months, however, small businesses will close due to limited capacity and demand. People are choosing to avoid crowds. This drop in demand will slowly cause businesses to close. We’ll see unemployment slowly start to rise by the end of summer.”
There will be jobs, but they won’t be in the places they were before the pandemic settled a plague curtain over the country. Barrero and his coauthors say our economy is experiencing “reallocation shock.” We’ve had to adjust very rapidly to doing things very differently, and some of those adjustments may linger. Barrero says this reallocation shock “may potentially have long-lasting effects on what sorts of businesses and jobs are most promising in years to come.” A lot of those jobs may be online.
Barrero advises we let go of our old idea of normalcy. If the job you held before the pandemic was in an industry that has suffered, come to terms with the fact that your new career in a post-COVID world will look very different. “To the extent the shifts in economic activity are permanent, one thing we can do is embrace them rather than try to hold on to how things used to be. This can potentially speed up the recovery.”
Bringing Back the Fun
The cancellation of large-scale events like SXSW and baseball season could economically devastate host cities. The ecosystem of jobs these leisure events once supported will disintegrate and scatter to wherever those skills are transferable – if there’s even anywhere to go in a standstill. “We’ll see sustained unemployment from these cancellations,” says Stockton “The host cities will certainly suffer and some will even go bankrupt from the drop in tax revenue.”
Adds Barrero, “Host cities and the leisure industry more broadly may need to reinvent themselves, which may lead to a painful and slow recovery.”
But hope lies within reallocation shock. “It will be bad for the affected industries in the affected cities, but. . . if people do not spend their discretionary dollars on sporting events, festivals and conferences, they are likely to spend it on other closely related activities,” says Burtless. “Some cities will be hurt by the new spending pattern, but others will be helped.”
We welcome your feedback on this article. Contact us at firstname.lastname@example.org with comments or questions.
|Visit our COVID-19 hub for more financial advice during the coronavirus pandemic.|