The pandemic’s grip on the economy appears to be easing. Job growth and retail spending surged in January, even as coronavirus cases hit a record. New York, Massachusetts and other states have Start lifting the mask mission in the house. California on Thursday announced a public health approach that would treat coronavirus as a manageable long-term risk.
However, the economy is still far from normal. Working, socializing and spending patterns, disrupted by the pandemic, have been slow to readjust. Prices are rising at their level fastest speed in four decadesand there are signs that inflation is escalating in wider range of products and services. In surveys, Americans say they feel more bleak about the economy today than at the height of the shutdowns and job losses in the first weeks of the crisis.
In other words, there may be no longer a “virus is boss” – as Austan Goolsbee, an economist at the University of Chicago, put it. But the changes it posed in the course of the campaign proved to be both more enduring and more pervasive than economists had hoped.
Wendy Edelberg, director of the Hamilton Project, said: “I – completely naively – thought that once a vaccine was in place, we were six months away from re-evaluating the entire economy, and instead we’re just mulling it over. , an economic policy arm of the Brookings Institution. “A switch hasn’t flipped, and I think it will.”
The looming results are a challenge for the Biden administration, which has so far failed to convince the skeptical public that its economic policies are working, despite falling unemployment and a rebounding recovery. beat the most optimistic forecasts by most measures. And that is a challenge for policymakers at the Federal Reserve, who have struggled to gauge how long the pandemic hiatus will last or how best to mitigate the impact. their movements.
It’s also a challenge for business owners like Katherine Raz.
Ms. Raz owns The Fernseed, a plant and flower shop with two locations in Tacoma, Wash. Like many retailers, the business has been on a Covid-19 roller coaster: After being closed for two and a half months at the start of the pandemic, Ms. Raz was able to reopen and she even expanded operations. business in the summer of 2020. But a wave of incidents later that year and a new round of government restrictions pushed the business to the brink and forced Ms. Raz to fire a company. of her seven employees.
In some ways, 2021 follows a similar pattern. Business boomed in the spring as falling case levels and soaring vaccination rates fueled optimism that the pandemic was coming to an end. Then the Delta and Omicron waves led to a drop in demand and created staffing challenges.
This time, however, Miss Raz was ready. She has built a financial buffer and invested in product lines that are less likely to suffer as cases increase. She reduced staff hours as business slowed, but avoided layoffs.
“I have a list of things, little levers that we can pull to make those adjustments to make the business more agile,” she said.
While Ms. Raz no longer worries about the survival of her business, she remains cautious. She wants to open a third location, in Seattle, and start offering classes and organizing events. She wants to hire a general manager to run the day-to-day operations.
Those plans are stalling while Ms. Raz grapples with the ongoing disruption. Supply chain issues have made it difficult to buy key products, such as terracotta pots that she said got stuck somewhere in a shipping crate. She stocked up on inventory wherever she could, tightening her capital for months longer than usual. And two years on from what she calls “emotional fluctuating,” she is constantly on the lookout for another setback.
“I stopped pinning my hopes on this being over, ever,” she said. “I just always prepare for the worst and don’t hope for the best.”
Some economists remain optimistic that the economy will normalize as the pandemic recedes, even if the process takes longer than initially expected.
Mr. Goolsbee, who served as chief economic adviser under President Barack Obama, was among those who argued early in the pandemic that the best way to revive the economy was to bring it under control. Until that happens, he said, the recovery will be driven by the ups and downs and flows of case numbers as well as hospital capacity, variations and countermeasures.
He recently pointed to the relatively mild economic impact of the Omicron wave as proof that consumers are becoming more comfortable.
“The reason the virus is the boss is because people are scared; they changed their behavior,” he said. “If this is a sign that fear is easing, the virus will no longer be the master, and the economic pandemic will be over.”
But others warn that the impact of the pandemic could last longer than the pandemic itself, potentially leading to a smaller workforce and faster inflation.
“Is it appropriate to start asking, will some of these changes stick to at least some degree?” Michael R. Strain, an economist at the American Enterprise Institute said. “Things that happen over a two-year period are more likely to stick than things that happen over a one-year period.”
Virus fears could still affect consumer demand. Spending at restaurants fell in December and January, as the most recent spike in coronavirus cases kept diners at home. Air travel, hotel bookings and other direct services were also affected. And although employers added jobs in January, total hours worked fell – partly because workers were sick at home, and most likely due to schedule cuts as demand fell. .
But demand for the service didn’t drop as far during the latest coronavirus outbreak as it did earlier in the pandemic, and preliminary data suggests it recovered more quickly. More comprehensive data through December shows that the crisis-induced shift in consumer spending away from goods and into services is reversing, albeit slowly.
Supply disruptions are hard to deal with. The lack of computer chipswood and even garage door organized the production of items from cars to houses, while there was a shortage of Container shipping This has resulted in delays for almost everything shipped from overseas. Some bottlenecks have been resolved in recent months, but logistics experts say it will month if not year to get the supply chain running smoothly again.
Then there is the labor shortage. The pandemic has pushed millions out of the workforce, and while many have returned, others – a disproportionate proportion of them are women – do not have.
Diahann Thomas was working at a call center in Brooklyn in January when she received a call from her son’s school: At the age of 11 she was exposed to a classmate who tested positive. with Covid-19 and she needed to come pick him up.
Coronavirus pandemic: What you need to know
“There are all these moving parts – one moment, they are at school, the next they are at home,” she said.
Mrs. Thomas, 50, said her employer refused to provide flexibility while her son was quarantined. So she quit – a decision she says was made easier knowing that employers wish to be hired.
“It boosted my confidence knowing that in the end it wouldn’t be difficult for me to pick up pieces, and now I have more bargaining power,” she said. “There’s this whole shift in terms of the employee-employer relationship.”
Ms. Thomas hopes to return to work once the school schedule becomes more reliable. But the pandemic has shown her the value of staying home with her three children, she said, and she wants a job where she can work from home.
Whether people like Ms. Thomas return to work will be crucial to the direction of the economy in the coming months. If workers return to the job market as schools and childcare become more reliable and health risks are reduced, it will be easier for manufacturers and transit companies to ramp up production and delivery, creating an opportunity for supply to catch up with demand. That could allow inflation to cool without detracting from the growth of the economy over the past year.
“If the public health situation improves, you should see an economic improvement in terms of job gains,” said Aaron Sojourner, a University of Minnesota economist who has studied economic pandemics. increase output, increase the function of the economy. “I think that’s a real limitation.”
But those who retire early or leave their jobs to care for children may not return to work immediately, or may choose to work part-time. And other changes could be similarly slow: Companies burned by shortages can maintain larger inventories or rely on shorter supply chains, increasing costs. Workers who enjoy flexibility from their employers during the pandemic may ask for it in the future. Rates of startups, automation and, of course, telecommuting have all increased during the pandemic, perhaps permanently.
Some of those changes could lead to higher inflation or slower growth. Other things can make the economy more dynamic and efficient. All of this makes it difficult for forecasters and policymakers to get a clear picture of the post-pandemic economy.
“In almost every respect, the economic ripple effects we can expect are temporary or temporary,” said Luke Pardue, an economist with Gusto, a payroll platform for small businesses. The short-term is proving to be more permanent. “The new normal looks a lot different.”
https://www.nytimes.com/2022/02/19/business/covid-economy.html The economic impact of the Pandemic is easing, but the aftershocks may linger