'Why Economic Pain Could Persist Even After the Pandemic Is Contained' diff viewer (7/8)

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Why Economic Pain Could Persist Even After the Pandemic Is Contained	Why Economic Pain Could Persist Even After the Pandemic Is Contained
2020-06-06 06:30:45 UTC	2020-06-06 07:40:25 UTC (about 1 hour later)
The one great reason for economic optimism during this pandemic is that once public health concerns are addressed, the economy could quickly return to something like pre-crisis levels.	The one great reason for economic optimism during this pandemic is that once public health concerns are addressed, the economy could quickly return to something like pre-crisis levels.
After all, if there were a safe way to return to normal behavior, restaurants could fill up, planes could begin flying, and millions of workers could return to their posts. But even if that happens in the coming months, the United States will still be facing waves of second- and third-order economic effects that could last years.	After all, if there were a safe way to return to normal behavior, restaurants could fill up, planes could begin flying, and millions of workers could return to their posts. But even if that happens in the coming months, the United States will still be facing waves of second- and third-order economic effects that could last years.
Although every recession is different and much depends on the details of how the federal government responds, there are some warnings from the last recession.	Although every recession is different and much depends on the details of how the federal government responds, there are some warnings from the last recession.
In the 2008 downturn, bank failures didn’t peak until 2010, causing a shortage of credit to businesses even once the economy was comfortably expanding. State and local governments, after experiencing a collapse of revenue, didn’t stop slashing jobs until early 2013.	In the 2008 downturn, bank failures didn’t peak until 2010, causing a shortage of credit to businesses even once the economy was comfortably expanding. State and local governments, after experiencing a collapse of revenue, didn’t stop slashing jobs until early 2013.
In this downturn, there is the looming collapse of many small businesses; potential losses in the commercial real estate sectors; a crisis in the funding of state and local governments that will most likely take years to play out; and a collapse of energy prices that could slow capital investment.	In this downturn, there is the looming collapse of many small businesses; potential losses in the commercial real estate sectors; a crisis in the funding of state and local governments that will most likely take years to play out; and a collapse of energy prices that could slow capital investment.
These factors could hold back the economy even if there’s a sharp rebound in employment as business life and public health return to normal.	These factors could hold back the economy even if there’s a sharp rebound in employment as business life and public health return to normal.
In any given quarter, that may net out to G.D.P. growth or contraction. But the end result may be less a sharp V-shaped recovery or gradual U-shaped cycle and more a very gradual return to health, like the Nike “swoosh” logo or something more like a tilde (~), the wavy punctuation mark.	In any given quarter, that may net out to G.D.P. growth or contraction. But the end result may be less a sharp V-shaped recovery or gradual U-shaped cycle and more a very gradual return to health, like the Nike “swoosh” logo or something more like a tilde (~), the wavy punctuation mark.
The potential for thousands, or even millions, of smaller businesses to close permanently stands out as a potential multiyear headwind to the economy. In a survey by the Society for Human Resource Management, half of small business owners expected to be out of business within six months. If anything close to that failure rate were to materialize, it could take months or years for their workers to find new jobs.	The potential for thousands, or even millions, of smaller businesses to close permanently stands out as a potential multiyear headwind to the economy. In a survey by the Society for Human Resource Management, half of small business owners expected to be out of business within six months. If anything close to that failure rate were to materialize, it could take months or years for their workers to find new jobs.
When businesses go under in normal times, or even in a typical recession, it can be part of a restorative process that keeps the economy dynamic — shifting workers and other resources toward the highest-productivity purposes.	When businesses go under in normal times, or even in a typical recession, it can be part of a restorative process that keeps the economy dynamic — shifting workers and other resources toward the highest-productivity purposes.
But a widespread shuttering of companies that had perfectly viable businesses as of February of this year is something else.	But a widespread shuttering of companies that had perfectly viable businesses as of February of this year is something else.
A business is also a set of relationships: between skilled labor and suppliers; physical assets like equipment and intellectual assets like a brand name; and employees and their base of regular customers. If a company fails because of the pandemic, another company may ultimately emerge to fulfill its economic role, but it could take years to rebuild that complex web.	A business is also a set of relationships: between skilled labor and suppliers; physical assets like equipment and intellectual assets like a brand name; and employees and their base of regular customers. If a company fails because of the pandemic, another company may ultimately emerge to fulfill its economic role, but it could take years to rebuild that complex web.
“I love the pizza place two blocks away,” said Erik Hurst, an economist at the University of Chicago Booth School of Business and co-author of a new paper that calculates that about 40 percent of lost employment at smaller firms in the pandemic results from companies that have reduced their payroll to zero. “If they go away, a new place might be started, but it will take time to hire workers, train everybody, figure out the menu, and it might not be the same. That means there’s a sluggish recovery.”	“I love the pizza place two blocks away,” said Erik Hurst, an economist at the University of Chicago Booth School of Business and co-author of a new paper that calculates that about 40 percent of lost employment at smaller firms in the pandemic results from companies that have reduced their payroll to zero. “If they go away, a new place might be started, but it will take time to hire workers, train everybody, figure out the menu, and it might not be the same. That means there’s a sluggish recovery.”
With revenue plunging precipitously at so many businesses — whether they ultimately close up entirely or not — the economic pain ripples throughout the economy.	With revenue plunging precipitously at so many businesses — whether they ultimately close up entirely or not — the economic pain ripples throughout the economy.
For example, commercial real estate owners will incur huge losses and may be unable to make debt payments to their banks or other lenders. Banks absorbing those kinds of losses will soon find themselves undercapitalized, potentially causing some to fail and those that survive to be in poor position to lend enough to support an expansion — in an echo of the post- 2008 experience.	For example, commercial real estate owners will incur huge losses and may be unable to make debt payments to their banks or other lenders. Banks absorbing those kinds of losses will soon find themselves undercapitalized, potentially causing some to fail and those that survive to be in poor position to lend enough to support an expansion — in an echo of the post- 2008 experience.
Banks in the United States had $3 trillion worth of commercial and industrial loans on their balance sheets as of late April, and $2.4 trillion more in commercial real estate loans. Together that amounts to 36 percent of the banking system’s assets, typically higher at the smaller regional and community banks that lend heavily to small and midsize businesses.	Banks in the United States had $3 trillion worth of commercial and industrial loans on their balance sheets as of late April, and $2.4 trillion more in commercial real estate loans. Together that amounts to 36 percent of the banking system’s assets, typically higher at the smaller regional and community banks that lend heavily to small and midsize businesses.
After years of expansion, the banking system has been well capitalized heading into this crisis. But what’s ahead will be a severe test.	After years of expansion, the banking system has been well capitalized heading into this crisis. But what’s ahead will be a severe test.
“If it’s a temporary loss of rent and the banks have liquidity, they will be able to carry that loan for a while,” said Thomas Hoenig, a former top bank regulator at the Federal Reserve and the F.D.I.C. who is now a distinguished senior fellow at the Mercatus Center. “Concessions on loans are common. Forbearance is common. Hopefully the pandemic passes and spaces start filling up and incomes return. If that doesn’t happen or it goes too long, those losses flow through and at some point affects the liquidity of the bank, and then you have a problem.”	“If it’s a temporary loss of rent and the banks have liquidity, they will be able to carry that loan for a while,” said Thomas Hoenig, a former top bank regulator at the Federal Reserve and the F.D.I.C. who is now a distinguished senior fellow at the Mercatus Center. “Concessions on loans are common. Forbearance is common. Hopefully the pandemic passes and spaces start filling up and incomes return. If that doesn’t happen or it goes too long, those losses flow through and at some point affects the liquidity of the bank, and then you have a problem.”
State and local governments are already starting to face cash shortfalls. They slashed more than one million jobs in March and April, many of them in schools, but if the 2008 experience were to repeat, they could be in cutting mode for years to come.	State and local governments are already starting to face cash shortfalls. They slashed more than one million jobs in March and April, many of them in schools, but if the 2008 experience were to repeat, they could be in cutting mode for years to come.
Their budgets were set in better times for the fiscal year now underway, and income tax collections this year are for their citizens’ earnings last year. But many revenue streams are under pressure, notably from sales taxes. And lower incomes in 2020 will depress income tax revenue in 2021.	Their budgets were set in better times for the fiscal year now underway, and income tax collections this year are for their citizens’ earnings last year. But many revenue streams are under pressure, notably from sales taxes. And lower incomes in 2020 will depress income tax revenue in 2021.
Moreover, states often have tools they can use to delay the full impact of revenue shortfalls, like selling assets, using rainy-day funds, and shifting money around. Think of it as the equivalent of an unemployed family selling some furniture or tapping savings that had been meant for a vacation.	Moreover, states often have tools they can use to delay the full impact of revenue shortfalls, like selling assets, using rainy-day funds, and shifting money around. Think of it as the equivalent of an unemployed family selling some furniture or tapping savings that had been meant for a vacation.
~~Updated June 2, 2020~~	Updated June 5, 2020
	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.	Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.	Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.	States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.	Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.	The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.	If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
But eventually those options run out. In the last economic cycle, that contributed to a weak recovery.	But eventually those options run out. In the last economic cycle, that contributed to a weak recovery.
“The first year is not the worst in any crisis,” said Tracy Gordon, senior fellow at the Urban-Brookings Tax Policy Center. “It’s the second year where you have to do the harder stuff, and spending is usually easier to cut than taxes are to increase.”	“The first year is not the worst in any crisis,” said Tracy Gordon, senior fellow at the Urban-Brookings Tax Policy Center. “It’s the second year where you have to do the harder stuff, and spending is usually easier to cut than taxes are to increase.”
A different economic episode from the recent past shows another risk for the medium-term future of the economy. In recent years, capital spending trends have been closely connected to commodity prices, especially for energy. In 2015 and 2016, a collapse in the price of oil contributed to a steep pullback in investment in energy, big enough to cause major economic distress in large sections of the country (though little trouble in the service sector).	A different economic episode from the recent past shows another risk for the medium-term future of the economy. In recent years, capital spending trends have been closely connected to commodity prices, especially for energy. In 2015 and 2016, a collapse in the price of oil contributed to a steep pullback in investment in energy, big enough to cause major economic distress in large sections of the country (though little trouble in the service sector).
The pandemic has fueled a steep drop in commodity prices as well, as demand for gasoline and other energy has collapsed. West Texas Intermediate Crude oil has fallen from above $60 at the start of the year to below $25 a barrel.	The pandemic has fueled a steep drop in commodity prices as well, as demand for gasoline and other energy has collapsed. West Texas Intermediate Crude oil has fallen from above $60 at the start of the year to below $25 a barrel.
That will be enough to drive many American energy producers toward bankruptcy and cause a sharp drop in demand for the heavy equipment they use for oil drilling. Prices for major agricultural commodities like corn and soybeans are down as well, which will most likely depress demand for farm equipment.	That will be enough to drive many American energy producers toward bankruptcy and cause a sharp drop in demand for the heavy equipment they use for oil drilling. Prices for major agricultural commodities like corn and soybeans are down as well, which will most likely depress demand for farm equipment.