Home sales are booming. Shares are reaching record highs. Industrial production is emerging from the divide it fell into at the start of this year.
And yet, the US economy is far from regaining the health it achieved, with low unemployment, spending consumers and booming travel, before the coronavirus crippled the country in March. Not while the viral epidemic is still raging and Congress remains deadlocked to provide more relief to tens of millions of unemployed people and state and local governments whose incomes have fallen.
Each week, about 1 million new Americans claim unemployment benefits – a level of job insecurity not seen in a single week during the depths of the Great Recession of 2007-2009.
Economists say that as many businesses have reopened and consumers have started shopping and spending more, the situation is starting to clear up, if only intermittently. Most say the economy is growing again. Still, the scars will surely remain from the catastrophic April-June quarter, when the government said the economy collapsed at an annual rate of 31.7% – by far the worst quarterly contraction since this hold began. of registers in 1947.
Some industries, especially those related to travel and hotels and restaurants, could struggle for years. And while the number of confirmed viral infections is on the decline, the threat of a major resurgence remains, especially as students increasingly return to schools and colleges. Consumers whose spending drives much of the economy and the economists who analyze it are decidedly pessimistic about the prospects for a return to prosperity.
“As long as we continue to see outbreaks of infection, disruptions to business – especially in industries exposed to social distancing rules – will continue,” said Rubeela Farooqi, chief US economist at High Frequency Economics. “The risk of business failures resulting from repeated closures is high, and the likelihood of permanent job losses increases with each successive shutdown, which could cause 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 survey results released this week by the National Association for Business Economics, two-thirds of economists polled said they believe the U.S. economy is still in recession. Nearly half said they did not expect it to return to pre-pandemic levels until mid-2022. Eighty percent believe any recovery will give way to a “double dip” recession of 25% or more.
In early spring, the economy entered a tailspin as millions of businesses suddenly shut down and consumers stayed home to avoid infection. Employers cut more than 22 million jobs – a record total, by far – in March and April.
Since then, the labor market and the economy have rebounded as businesses slowly reopen. The Federal Reserve’s efforts to keep interest rates very low helped fuel a record-breaking stock market frenzy. Home sales increased thanks to extremely low mortgage rates and pent-up demand. And an upturn in auto production has boosted US industry.
In total, employers created nearly 9.3 million jobs in May, June and July. Yet this hiring surge only replaced 42% of the jobs lost in March and April. Over 27 million people continue to benefit from some form of unemployment assistance.
Additionally, a summer resurgence of confirmed COVID cases in the South and West forced many businesses to shut down again in July. Data firm Womply reports that business closures have mostly leveled off over the past four weeks. Yet 70% of bars in Texas and 71% of health and beauty stores in California were closed by mid-August, Womply found.
After promulgating a massive financial bailout in March, Republicans and Democrats in Congress failed to agree on allocating additional aid to the unemployed and struggling states and localities. The expiration of $ 600 a week federal unemployment benefit – a lifeline to help the unemployed survive the crisis – is leaving many families in despair.
“My income is basically halved,” said Taylor Love, a 34-year-old unemployed massage therapist in Austin, Texas. “Paying our mortgage is going to be a struggle. We’re going to have to tap into what little savings we have. ”
President Donald Trump signed an executive order on August 8 proposing a lean version of expanded unemployment benefits. At least 39 states have agreed or said they will seek federal grants that would allow them to increase weekly benefits by $ 300 or $ 400. But questions remain as to how quickly this money will get to people or how long it will last.
In a question-and-answer session after a speech Thursday, Fed Chairman Jerome Powell said that “if we can keep the disease under control, the economy can improve pretty quickly.” But he warned that sectors of the economy that have been hit the hardest, including travel and tourism, will take longer to recover.
“It’s a lot of workers – we have to support them,” Powell said.