Econ­o­mist: Taxes, jobs to fac­tor in re­cov­ery

Con­sumer con­fi­dence is an­other con­cern

Albuquerque Journal - - BUSINESS - BY STEPHEN HAMWAY

The path to­ward an eco­nomic re­cov­ery is still un­cer­tain, but there are a few key vari­ables to keep an eye on, ac­cord­ing to Nick Sly, econ­o­mist and Den­ver branch ex­ec­u­tive of the Fed­eral Re­serve Bank of Kansas City.

Dur­ing a we­bi­nar hosted Wed­nes­day by the Eco­nomic Fo­rum of Al­bu­querque, Sly said any eco­nomic re­cov­ery will be tied in­ex­orably to the path of the pan­demic in the near term.

Over the longer term, how­ever, there are a few use­ful in­di­ca­tors that may de­ter­mine how long the eco­nomic down­turn lingers once the virus abates, in­clud­ing how quickly un­em­ployed work­ers are able to re­turn to their jobs.

“If that par­tic­i­pa­tion rate starts to pick up rel­a­tively rapidly, that would be a good in­di­ca­tor to me that busi­nesses are go­ing to find the work­ers they need,” Sly said.

Sly noted that fi­nan­cial mar­kets, job­less claims and over­all busi­ness ac­tiv­ity have each sta­bi­lized af­ter steep de­clines ear­lier in the year. Na­tion­wide, the un­em­ploy­ment rate peaked at 14.7% in April but had dropped to 8.4% by Au­gust, ac­cord­ing to data from the U.S. Bureau of La­bor Sta­tis­tics.

De­spite the sta­bi­liza­tion, Sly said, there are a few longterm po­ten­tial im­pacts of the eco­nomic down­turn to re­main wary of, par­tic­u­larly in New Mex­ico.

De­clin­ing tax rev­enues mean that state and lo­cal gov­ern­ments will have less money avail­able, which stands to hurt states such as New Mex­ico that rely heav­ily on gov­ern­ment spend­ing.

“Those de­clines in tax rev­enue ... will be a risk for us to

con­tinue mon­i­tor­ing,” Sly said.

Sly also said he’s con­cerned con­sumers may not feel con­fi­dent enough to re­turn to their pre-virus spend­ing pat­terns. That, in turn, could cre­ate a sit­u­a­tion in which un­em­ployed work­ers re­main out of work for a long time, los­ing key job skills and be­com­ing less will­ing to look for a job.

“Per­sis­tent high un­em­ploy­ment can lead to last­ing dam­age to the econ­omy,” Sly said.

For that rea­son, Sly said, reen­gag­ing work­ers who have lost their jobs is go­ing to be a pri­or­ity, par­tic­u­larly in states with a high per­cent­age of work­ers in ser­vice sec­tor jobs.

“I think this risk is par­tic­u­larly salient in New Mex­ico,” Sly said.

He added that un­cer­tainty it­self is a bar­rier to eco­nomic re­cov­ery, as com­pa­nies be­come more cau­tious about re­hir­ing em­ploy­ees be­cause they don’t know what to ex­pect from the path of the virus and, to a lesser ex­tent, the pres­i­den­tial elec­tion.

On the la­bor side, the un­cer­tainty around the avail­abil­ity and safety of work makes peo­ple nervous about re­turn­ing.

“In that sense, the un­cer­tainty … it­self is a bar­rier to the re­sump­tion of eco­nomic ac­tiv­ity,” Sly said.

Nick Sly

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