Back then, there was little evidence to back up these claims — and, in fact, they were typically used to rebuff additional stimulus that could have brought jobs back sooner. In the current downturn, however, things are different: Today, uncertainty — caused now by the interplay between a public health crisis and an economic one — really is keeping the economy back, and it threatens to stall any recovery unless it can be countered by an effective policy response.
When the pandemic began, economists described putting the economy into a “medically induced” coma — shutting down activity until the novel coronavirus could be kept under control. But the public health measures that could have fully contained the virus — a robust testing regime, contact tracing and so forth — haven’t been implemented at scale, meaning the coronavirus remains a daily fact of American life, as spikes in infections in many states make clear. As a result, the economy may face a period of sleepwalking, stuck tentatively in between the full closures of the spring and typical activity.
The Trump administration has touted two months of increased hiring after the historic job losses of the spring, arguing that — in the president’s words — it “proves that our economy is roaring back.” But consider all the ways in which, regardless of stay-at-home orders, daily economic behavior remains affected by the virus — and, in particular, by the lingering uncertainty over whether we can return to normal activities without being at risk of contracting the coronavirus.
According to recent Morning Consult polling, only 35 percent of U.S. adults said they felt comfortable going out to eat right now, only 31 percent were comfortable going to a shopping mall and 20 percent were comfortable going to the movies. Real-time data showed that after spikes in cases in states such as Texas, Florida and Arizona, foot traffic to retailers in major cities in those states started to decline again in late June — even before state and local governments reversed measures that reopened bars and restaurants.
The risk is that the “in-between” economy forces a set of decisions that is bad for public health and bad for the recovery. Consider that most restaurants operate under thin margins, with fixed costs such as rent, equipment leases or utilities that can’t be easily reduced; in New York, 3 in 5 restaurants say they need at least 70 percent occupancy to survive. So restaurants and other small businesses will shut down rather than fall deeper in debt because of uncertainty as to how long depressed activity will last, even if they would be viable under normal conditions.
Without confidence that the federal government will help them address their plummeting revenue, states and cities will let go teachers and other public employees, beyond the 1.5 million laid off so far. Sick employees may feel compelled to come into work, putting others at risk of infection, if they are unsure whether robust unemployment insurance benefits — currently set to expire at the end of July — will remain available. The greatest risks will be borne by low-income workers of color; according to a Roosevelt Institute study, 42 percent of black and 33 percent of Hispanic essential workers are extremely concerned about coronavirus infections at work, compared with 23 percent of white essential workers.
Yet rather than help people avoid these harmful decisions, the Trump administration and its allies are making them even more stark. Most importantly, the administration has failed to keep the virus itself under control, leading to growing caseloads and renewed fears about the future path of the pandemic. Instead, the White House has taken a strategy of hoping that Americans, in the words of a senior administration official speaking to The Washington Post, will simply “live with the virus being a threat.” At the same time, the administration and its allies have either rejected outright or slow-walked economic measures that could help prevent the uncertainty resulting from that ever-present threat from leading to more protracted economic pain.
For workers and families, those measures would include extending expanded unemployment insurance and direct stimulus payments that have helped cushion the income shock for millions of families over the spring, but will soon dissipate. (More than 40 percent of jobless workers — and more than 60 percent of both black and Hispanic workers — couldn’t cover three months of expenses without measures, according to Federal Reserve data.) States that have told workers they will lose unemployment insurance if they refuse to go back to their job — even if they are “apprehensive about returning to work because of health concerns” — should be prohibited from forcing this choice between safety and economic security.
At the same time, workers need to know that if they return to work, they can do so safely. Rather than shielding businesses from legal claims if workers or customers get sick, the government needs to implement and enforce clear safety standards; the Occupational Safety and Health Administration, which has its lowest number of inspectors since 1975, only issued its first virus-related citation at the end of May. Workers will also need certainty that they will have reliable access to child care if they go back on the job, especially with school openings in flux and half the slots in the country at risk of permanently disappearing.
Small businesses need confidence that — whatever happens in the next stages of the pandemic, including intermittent reopenings and reclosings — staying in business won’t mean falling into deeper and deeper debt. Large businesses will gladly borrow at attractive rates until the crisis passes; taking on more debt is a more harrowing proposition for small-business owners worried about their personal credit, if they can even find a lender. And although nearly half of all retail rents went unpaid in May, the implications are different for companies such as Starbucks or Chipotle that can use their market power or legal sophistication to renegotiate leases, compared with a small business that may struggle to navigate a chain of landlords, banks and mortgage-backed security investors to get relief.
Government support should help small businesses stay solvent, through flexible grants and loans targeted toward fixed costs such as rent or mortgage. Work-sharing programs — where unemployment insurance pays workers who are temporarily part-time for the hours they are idle — could allow businesses to flexibly adjust their operations while minimizing the harm for workers, yet only a tiny fraction of the unemployed are using them. Small businesses should also receive help to get out from under debts they have incurred by trying to stay afloat and assistance to reshape their operations to adjust to a very different business environment.
Throughout all of this, the federal government needs to enact policies that blunt the impact of the uncertainty that the virus will cause in the months ahead, rather than amplify it. Instead, the administration and Senate Republicans have continued to proceed sluggishly, even as states and cities begin to implement layoffs and the $600 boost to unemployment benefits is set to expire in less than three weeks.
But the unclear economic outlook — or the fact that the unemployment rate has begun to drop from a historically high level — doesn’t justify a “wait-and-see” approach. Instead, it calls for providing assurances that federal stimulus will be automatically extended until a recovery is complete. That approach works whether the unemployment rate declines faster than expected or we face a hard climb due to a renewed need for business closures and social distancing restrictions.
There is no way to fully remove the uncertainty that comes from a pandemic, especially one precipitated by a virus that we don’t yet fully understand. But we can still help people see to the other side of the crisis in ways that will help both keep Americans healthier and prevent even deeper economic pain.