Post COVID 19: A new U.S. Economy

With the recent and debilitating April Jobs Report released by the US Labor Department the figures gave a jolt, but one not entirely unexpected, by most economists, but nevertheless ultimately shocking the nation with the worst unemployment record, reaching back to nearly 65 plus years ago

Despite the bad news, it’s safe to assume that most people know that this was the fault of the pandemic of Covid 19 and its deleterious effect on the American economy, now mostly shuttered, as a result of shelterin place orders by state leaders..

While most have dwelled on the 20.5 million people who have lost jobs in April, many others are also unaware that the marquee rate as well call it, or the banner unemployment rate, as many see it, of 15 percent, is actually less than the household survey rate, called the U6 rate that has shown a whopping 20 percent unemployment rate.

Conjoined to this bad news is that many state governments are still under the stay at home orders, by their governors, and as reported earlier, some GOP governors have given orders to reopen some businesses, but others have not, and there are indeed many, such as Illinois Gov. JB Pritzker and Michigan Gov. Gretchen Whitmer, who have stayed the course, out of an abundance of caution, and have said that they will let the data speak for themselves before going further.

They have, in turn, faced intense opposition and noisy demonstrations, and some state officials, as in Michigan, have had to deal  with armed protestors facing down the legislators in the state capital of Lansing. A recent death threat against Whitmer has generated even more concern.

Some protestors are saying that these governors are anti constitutionalists, and have over extended their authority while still others, have shown  a hidden political agenda of strongly  anti Democrat stance , a move detailed by the Chicago Tribune, recently; and one that shows the not quite unseen hand of the GOP.

Despite these alarming trends, what seems to be left unsaid, in many instances, is what will America look like, even if the stay at home orders were suddenly lifted tomorrow? 

For most observers, us included, it will be a changed landscape with far less independent and small businesses, and one where many office workers, and others, will still be working from home, either in the family den, or at the dining room table.

Some may even prefer it that way as a road to lead a less stressful life in America’s largest cities: New York, Los Angeles and Chicago, has become increasingly unaffordable and with increasingly high rents, many younger workers are wondering whether to relocate to less urban areas.

Federal leadership has waffled between assembling a task force, and then announcing plans to disband it, only to have it stay, and many are bemoaning the lack of a consistent approach to fighting the pandemic, from the White House. 

Adding to this is the fact that President Trump recently recommended that people inject themselves with Lysol to rid themselves of the virus, a dangerous recommendation, that was later retracted..

With testing and contact tracing at lower levels across the nation, those states that do reopen parks, restaurants, and the like will have reduced attendance, coupled with stringent adherence to social distancing, and in some cases, masked servers, leading to the further demise of independent restaurants,  and even more applications for unemployment.

Take for example, restaurants in Hammond, Ind, south of Chicago, where diners are at 50 percent capacity, with tables spaced well apart, not exactly a recipe for an increase in profits.

Recalling that some in the restaurant associations had predicted that only one third will survive, mainly the big players, with corporate backing, for many areas, but especially urban areas, will see one of the more salient aspects of city living, operating well below previous levels.

Small businesses in America account for 61 percent of employers in the food service sector, along with hotels, according to the 2017 Census Bureau; and that also creates a void for single mothers, college students, and people of color.

That occurrence alone adds to the near 4,000 unemployment claims in recent weeks. And, as is now well known, the Paycheck Protection Program was swiftly drained in its first inception, in mid April, and now some are also warning that the recent addition of $310 billion may also not be enough.

Mired in well intentioned actions by Treasury Secretary, Steven Mnuchin, the initial conduit through banks, and vague rules, allowed some large corporations, with close ties to banks to receive money that they did not need, causing Mnuchin to threaten legal action, if they don’t surrender the funds.

Pritizker in Illinois has planned a five part phase in for reopenings, amidst the clamor of noisy oppositions, and some feel that the state is fighting with one hand tied behind its back, without proper help from the federal government; and, there are some who predict, even with restrictions, and especially without a vaccine that the economy, there might not be a fully functioning US economy till the beginning of 2021.

In fact there are now predictions that there will be at least an increase of 130,000 cases across the country by August, and possibly further.

On Wednesday for a partly virtual address to a Senate Panel that haste would make waste of many lives if reopening was enacted too soon, said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases,  who said, “if we do not respond in an adequate way when the fall comes, given that it is without a doubt that there will be infections that will be in the community, then we run the risk of having a resurgence.”

Concerns as we have noted before, along with others in the media, are suffering an intense debate on which business will survive, and which won’t, and on the corporate scale, nationally, there are some large retail giants filing for bankruptcy such as J. Crew, and Gold’s Gym, who have seen both sales and memberships drain to unsustainable levels.

Yet, In another vein, albeit ironic, there has been an increased sales revenue from Amazon, that “rose 26 % from a year earlier to $75.5 billion in the three months through March,” reported the Wall Street Journal, in a not too surprising move with most retailers closed, that are deemed nonessential.

In a darker move many companies have used the virus to lay off workers that were contemplating, and in some instances, voting to unionize, and as The New York Times has reported, this has happened with Trader Joe’s, despite a company denial, and also truck drivers with Cort Furniture Rental, not surprising considering the anti labor movement that has spread, all the way, in recent months, to the United States Supreme Court.

These moves have also spread to white collar workers such as journalists at the Cleveland Plain Dealer, who were peeled off weeks ago, and replaced with content from the non unionized labor from cleveland.com, a move also denied by management who said they merely wanted to expand coverage to suburban areas.

It seems  a safe bet, that when the American economy comes back from its public health exile, that we will be seeing a much smaller, non unionized workforce, that will still retain much of the flavor of present times, but in a dramatically different form.

Can the US economy be saved?

Sec'y Mnuchin

Success has many fathers, while failure is an orphan, is a classic quote often attributed to President John F. Kennedy, and with the current COVID-19 pandemic and its effect  on the US economy, it might be coparenting with the desire by President Trump to lift the shelter-in-place mandate, and open closed non-essential businesses, despite dire warnings of a second wave that might hit the country, if done wholesale.

Politics plays a role in the decisions made in the upcoming presidential election, and one where the bully pulpit of the White House reigns supreme, with the once robust economy a strong plank in Trump’s reelection platform, now only a distant memory.

Tagging along are Republican governors in some southern states where who are opening selected businesses, beginning this past Wednesday. Brian Kemp in Georgia has led the herd, but the president, in a somewhat disingenuous statement, said that he was against that move as unsafe.

Amazingly enough he also stated that self-injections with Lysol might rid someone of the virus, only to backtrack on Thursday, saying that he was being sarcastic, which quickly brought him condemnation from leading scientists.

Meanwhile doctors and epidemiologists have urged caution in making any hasty decisions for even a wholesale opening that might later result in a second wave of the virus, this fall; and, combined with the annual flu season would prove doubly dangerous to the public..And by some accounts, that could be 150 deaths per day.

No one is arguing that America is not in a recession, but the junction of politics and public health  is creating a dangerous mix that might further endanger the nation’s financial welfare, which in turn that might, in the future, create economic damage in the trillions of dollars.,

Six weeks of lockdowns are making many Americans restless, and while some miss shopping, and going to restaurants, others are worried about how to pay bills; and despite the arrival of the first deposits from the CARES bill recently passed by Congress, many business owners ,especially small business owners, are also worried about remaining open, but last Tuesday, Congress made strides to add another $400 billion, or so, to the Paycheck Protection Program that will fund them, after the first $380 billion was drained almost as soon as it was issued..

This is all against a backdrop of noisy demonstrations in Chicago, Miami, and other states, accompanied by honking automobile horns outside their state government offices, with demonstrators arguing that they don’t have the virus and want to get back to work, while still others say that the coronavirus pandemic as a hoax, stating uncategorically, “This is just the flu,” while still more say that the government’s efforts to prevent illness, and death, is only a ruse by a godless group of bureaucrats.

In Illinois, Gov, JB Pritzker demurred about making any changes beyond the deadline of May 1, but on Wednesday announced that his state’s lockdown would continue till the end of May, with only a few exceptions.

Pritzker said that some retail business would open with curbside deliveries, and also opened some golf courses, but most importantly hospitals would be allowed to perform some elected surgeries, adding much needed revenue to their balance sheets.

Financial Times columnist Edward Luce wrote recently, that for the US, the “learning curve remains flatter than its infection rate. It should be the other way round.”

Overall  many questions remain: how many peoplpe are infected, and as he noted, only 1 percent, 3.2 million, have been tested, despite Vice-President Pence’s earlier statements that 4 million, or more, would be.

The country is well below the level of testing needed by scientists to track the trajectory of “the pandemics reach,” in fact ten times the above amount is recommended.

Luce also pointed out that had the shutdowns occur two weeks earlier than they did, 90 percent of US deaths might have been prevented.

Of course, all of this leads to the development of a vaccine, and without it Americans could see their economy free fall into a tailspin, with a “hit to US wealth . .. of $5 trillion over 30 years, it strignent measures are not taken,” he added.

With the nation’s public health consigned to the states, and the lack of a federally managed program, economists and academics are worried that the economy would indeed meet Luce’s predictions.

Speaker of the House Nancy Pelosi managed to add more than $100 billion for America’s hospitals to the recent negotiations, and an increase for the food stamp program, known as SNAP, to further limit the damage on families and individuals, giving a lifeline, should states extend their shelter-in-place orders; plus $150 billion for state and local governments to continue their fight against the pandemic.

Additionally, unemployment benefits have increased roughly to $985 per week, and together with the $1,200 stimulus checks, can help, even temporarily, keep many Americans afloat, while scientists and doctors labor for a vaccine.

Unfortunately the Pandemic Unemployment Assistance Act which adds extended benefits has created a series of massive delays said The New York Times on Thursday, and that only 17 percent of eligible people have received them, amidst the state benefits websites crashing.

Many people are worried about paying rent, mortgages, credit card bills, and groceries, and the concerns are mounting, with the latest figures showing that one in six Americans have lost jobs due to the pandemic.

Stepping into the fray the Federal Reserve has taken an active role in buying up municipal and corporate bonds, as a shelter against a stock market meltdown.

Stabilizing Treasuries to prevent an even deeper recession is also  goal that Fed Chair Jerome Powell, and Treasury Secretary Steven Mnuchin are coordinating, giving fresh input to some in Washington who initially that that the former, when first appointed, might have been a milquetoast.

For major companies, such as Southwest Airlines, the moves are even further precarious and its president noted that he wants to avoid furloughs and layoffs, a feat that some economists might be tricky, if not impossible.

Finally, a nearly half trillion bill was passed by both houses of Congress on Thursday to give not only $500 billion to refill the Paycheck Protection Program, but also as Pelosi pointed out, the added $100 billion to hospitals across the country to aid in its fight against the virus is desperately needed.

There was controversy with the first payouts with many business - especially small ones -  saying that the application process was onerous, and that some larger corporations,even colleges, were unfairly afforded funds such as Steak n’ Shake, Harvard University and Ruth Chris’s Steakhouse; all of which have now given back the money awarded to them.

As a safeguard against future problems, the Government Accounting Office is now tasked with oversight to prevent abuses, and to provide greater efficiency.