On September 28, 2020, during a press conference at the Rose Garden of the White House, U.S. President Donald Trump made several remarks regarding the corona virus pandemic, the state of race relations in the nation, and of course, the economy. In this Rose Garden speech, the president sighted the release of a strong jobs report, hinting that the country is slowly recovering from the global pandemic. It is an economic recovery that he fully attributes to his administration.
This speech comes on the eve of the first presidential debate where Trump is to square out with a notable opponent, Joe Biden. Are the president’s claims of an economic boost painting the whole picture? For a president seeking reelection, we have to analyze all the claims based on the current statistical data. Here are what some economists have to say about this claim of economic recovery.
The Positive Side
Here is what we know. Federal Reserve Chairman Jerome Powell paints an optimistic picture of the U.S. economy. While speaking at Capitol Hill, the chairman predicts a roaring economy after the coronavirus pandemic. Whereas at least 22 million jobs were lost during the lockdown, another 10.6 million jobs have since been created. Economists backing the chairman’s views say the economy will likely rebound at a 31.7% growth rate from April to June 2021. It is a seasonal growth rate that is revised and annualized in the third quarter.
The Flip Side:
1. Effects of the Coronavirus Pandemic
We still have shops and businesses yet to resume operations after the post-coronavirus pandemic. At least 11.5 million persons who lost their jobs due to the epidemic are yet to secure any consistent work. The CARES Act cushioned the airline industry jobs by pumping a bailout amounting to $50 billion. Only that, this cushion is about to expire, exposing another 100,000 persons in the airline industry to job losses. That is unless Congress intervenes by providing the much needed federal help to extend the bailout.
2. Threats of a Second Wave with No Stimulus Package in Sight
Then, there is the threat of a second wave of the Covid-19 infections flaring up in Europe and many other parts of the world. When the pandemic started, Congress passed the first stimulus bill, with part of its benefits as a supplemental jobless aid amount to $600 each week. As Powell puts it, the unemployed would spend, not because they can afford it, but because they have money in their bank accounts. It painted a picture that all is well when the truth is far from it.
Once the money dries up, and no further stimulus checks in the offing, consumers will start scaling down their spending, leading to a significant hit to any economic recovery strategies. For sure, the bill ran out at the end of July, and Congress is yet to agree on another stimulus package. Now, with the unemployment benefits getting lower, the initial sugar rush is wearing off. Indeed, more help is needed as we approach a long winter.
3. Too Little Too Late: Trump’s Executive Order for $300 in Weekly Unemployment Benefits
In August 2020, President Donald Trump signed an executive order that effected a weekly $300 unemployment benefit. The funds, originating from the Federal Emergency Management Agency, serve as supplements to the jobless. Later, this benefit increased by $100 a week, a welcome increment considering some of the beneficiary states had already exhausted the amounts allocated to them.
Other business owners on the Paycheck Protection Program are voicing their concerns about the future as the crisis rages on with their current funds slowly drying up.
4. Dampened Consumer Spending
Now, America’s economy is pegged on consumer spending patterns that sustain high retail sales. According to Statistica.com, the projected 2024 retails sales in the U.S. were at $5.94 trillion. 2019 had experienced a record $5.47 trillion in retail sales. But, the pandemic is pushing down these figures to $4.89 trillion in 2020. The retail sales can improve, only at a slower pace.
5. What about the Pre-Coronavirus Economic State?
Despite the president’s chest-thumping about the thriving pre-coronavirus economic state of the country, the events of 2020 make such gains irrelevant. And even without the pandemic, many citizens believe that what Trump is describing as his presidential record is, in fact, courtesy of his predecessor, Barack Obama, or to Obama’s second-in-command, Joe Biden. The fact remains, 2020 GDP will likely contract for the full year.
The Bottom Line
Mark Zandi, Moody’s Analytics chief economist, insists that the U.S. job market is yet to recover from the pandemic. Despite the White House declaring the unemployment rate falling from 14.7% to 8.4% between April and August, these claims are despite the White House. Even with this significant decrease, there is still an 11 million job deficit now than the pre-coronavirus labor market. Black unemployment is now skyrocketing when you look deeper, rising from 5.5% in 2019 to 13% in August 2020. Likewise, the unemployment rate for the Hispanic minority groups stands at 10.5%. As Mark Hamrick, a senior economic analyst with the Bankrate.com puts it, White House bragging about the positive pre-coronavirus economy offers little assurance to the electorate about what awaits them post-pandemic.
Note that any recovery plan for the economy is ultimately pegged on how the pandemic will turn out for the rest of the year. Gus Fauher, a chief economist with PNC, notes that Congress should agree on a stimulus soonest. Failure to do so may only weaken the economy even further. Yet, as Powell puts it, reducing infections will mean that there is no need for extra fiscal support. Powell made these remarks on Thursday while speaking at the Senate Banking Committee.
As of November 3, the U.S. election date approaches, many lawmakers are busy with modalities to approve a new U.S. Supreme Court Justice. It is becoming evident that a further stimulus package will only come after the election. Yet, Oxford Economics experts remain optimistic that Congress can pass other $1.5 trillion bailouts before the election date. The clock is ticking. Washington must compromise to get any deal before this window closes.