President Joe Biden is inheriting an economy that is down 10 million jobs since the start of the pandemic, despite two COVID relief packages. Job losses and business closures have overwhelmed certain sectors like leisure and hospitality — down 4 million jobs — while other sectors remain relatively unscathed.
In fact, some areas of the economy are doing quite well, according to Constance Hunter, the chief economist at KPMG.
“If we look at just high-propensity business formations, we’ve had about 200,000 during 2020,” Hunter said. “The shock of the pandemic really has caused a different need for different goods and services than existed prior to the pandemic.”
Which, she said, will be integral to how the Biden administration will need to approach further economic support.
Hunter spoke with “Marketplace Moring Report” host Sabri Ben-Achour about what we know about business closures and formations during the pandemic — and how the vaccine enters into relief equation. The following is an edited transcript of their conversation.
Sabri Ben-Achour: Do we know how many businesses have made it this far and how many have not made it this far into the pandemic?
Constance Hunter: So business exit is a lagged indicator; it comes out almost two years after. So we have data from 2018. We do not have current data. However, when we look at Yelp data, it seems that there are about 78,000 businesses that closed. Now, this compares to 300,000 businesses which closed during the global financial crisis. And we need to juxtapose that against business formations, which have been surprisingly strong. So if we look at just high-propensity business formations, we’ve had about 200,000 during 2020.
Ben-Achour: How does that square with the fact that we’re down 10 million jobs, though?
Hunter: This is a phenomenon that’s happening all around the developed world. We see a fall in the number of jobs. But we also see, because of fiscal assistance, because of closures, we see a very high savings rate. And, of course, we have low interest rates. And the shock of the pandemic really has caused a different need for different goods and services than existed prior to the pandemic. And so we think that that is a large factor.
Ben-Achour: But I just wonder if the business destruction that has occurred has been concentrated, and if that means something for how we think about offering help to the economy.
Hunter: So yeah, I think a couple of things. One, I think from this Yelp data, which is unofficial data, it seems it has been concentrated in leisure and hospitality. And we know, for example, that there are 4 million fewer leisure and hospitality workers than prior to the pandemic. And so this is an industry that, even those firms that are still open are not operating, by and large, at maximum capacity. So we know that that’s an area of the economy that is still struggling and that needs assistance.
Ben-Achour: Looking at the economy that President Biden is inheriting, do you think additional stimulus will be needed?
Hunter: Well, that really depends on the pandemic. If we are able to dramatically increase the number of vaccinations, that would go a very long way to getting us back on track. And of course, the idea here is we want the virus to be eradicated as quickly as possible because the longer it persists, the longer the suffering occurs and the greater fiscal stimulus is required.
COVID-19 Economy FAQs
So what’s up with “Zoom fatigue”?
It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.
How are Americans spending their money these days?
Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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