Reviving the economy won’t be like flipping a switch
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Look around and you can see the economic damage caused by this public health crisis. We’ve been hearing from people who’ve lost their jobs and business owners who’ve had to let them go.
What happens when we get through this? President Trump had something to say about it in his Coronavirus Task Force press conference Sunday.
“I really believe everything’s going to fall into place. It’s going to be beautiful,” Trump said. “I call it a pent-up demand. People are dying to go out to a restaurant. People are dying to go onto airplanes.”
Consumers do drive 70% of the economy — or did, at least. Some demand will come back when this is all over. For instance, people who put on hold buying a needed dishwasher or replacing worn-out shoes. But that doesn’t work for everything.
“Do we go out to restaurants or bars three times as often when this is over?” asked Ben Jones, a professor at the Kellogg School of Management at Northwestern University. The short answer: No.
“You can defer the TV, the couch, the home repair, the car, but a lot of the demand that’s lost on the service side is lost permanently,” he said.
Some consumer demand is still strong for things like groceries. But Marie Driscoll, managing director for luxury and fashion at Coresight Research, said even there, coronavirus has already left a lasting effect on the consumer economy.
“When this is over, you probably will see changed habits in terms of the way people shop for food because they will have gotten used to getting a certain amount of their food and staples online that they weren’t doing before,” Driscoll said.
Coresight Research found that about 60% of consumers expect the COVID-19 disruptions to last three to four months, while 20% think it will be five months or longer.
What happens to consumer demand after that depends on what the economy looks like.
“Will they feel as confident buying a new home, getting a seven-year loan on a car, getting new furniture and appliances?” said Karen Harris, managing director of the macro trends group at Bain & Co.
Jones said the market economy will eventually rebalance, but time matters.
“The longer we stay in the off mode, the harder it is to turn that switch up and expect the lights just to come back on,” he said.
Because shutting down a business, and an economy, is a lot easier than getting it going again.
Correction (March 23, 2020): A previous version of this story misstated Marie Driscoll’s title. The text has been corrected.
COVID-19 Economy FAQs
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
Give me a snapshot of the labor market in the U.S.
U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
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