The ROUGH ROAD AHEAD
Biden inherits damaged economy, but signs of hope are emerging
WASHINGTON — President Joe Biden has inherited a badly damaged economy pulverized by the pandemic, with 10 million fewer jobs than a year ago and as many as one in six small businesses shut down.
Yet there are also signs of resilience and recovery that suggest the prospect of a rebound. Despite the bleakness of the economic landscape, Biden by most accounts faces a less daunting challenge than he confronted as vice president under Barack Obama more than a decade ago in the depths of the Great Recession.
The hardships inflicted by the pandemic recession have been deep but concentrated in a few extremely hard-hit sectors. Much of the economy has held up surprisingly well. People fortunate enough to keep their jobs — disproportionately affluent Americans — have bulked up savings.
There are also signs that the job market might be set up for a fast hiring recovery.
Still, for now, many signs are dreary: Consumers have retrenched, and months of job gains have turned to losses. New applications for unemployment benefits remain shockingly high. And the human toll of the pandemic recession, from depressingly long food-bank lines to apartment evictions, has yet to show much improvement.
Here is a closer look at the economy the 46th president is confronting:
MORE JOB LOSSES, LESS SCARRING: The nation has regained more than half the 22 million jobs that were lost to the pandemic in March and April. But hiring has weakened for six straight months. In December, it actually turned negative, with the loss of 140,000 jobs.
Employers may still be cutting jobs because viral cases remain rampant, cold weather is restricting outdoor dining and other activities and consumers are avoiding in-person services, from hotels to airports to retail shops. With unemployment at an elevated 6.7%, a shortage of hiring is prolonging the pain for people out of work.
A major concern for economists is what they call “scarring” in the job market — longterm and permanent job losses that detach people from the job market and diminish their skills and professional connections.
CONSUMERS PULLING BACK, FOR NOW: The raging pandemic took a fresh toll on the economy over the holiday shopping season, with sales at retail stores falling for three months in a row. Sales at restaurants and bars tumbled 4.5% in December and collapsed by one-fifth for 2020 as a whole.
There are early signs, though, that $600 checks for most Americans authorized in last month’s rescue aid package are beginning to boost spending. Economists at Bank of America said spending on their debit and credit cards jumped 9.7% for the week that ended Jan. 9 compared with a year earlier.
HOUSING SIZZLES FOR THOSE WHO CAN AFFORD ONE: Many Americans who have kept their jobs have capitalized on the new work-from-home culture, becoming first time homebuyers or moving into larger digs. Builders broke ground in December on the most new homes since 2006. Home sales are running about 25% above year-ago levels. Four-fifths of construction jobs lost in the pandemic have returned, a much faster rebound than employment overall. MANUFACTURING IS SPARED THE WORST, FOR ONCE:
Though factory output is still recovering from the initial pandemic-induced shutdowns, for once the nation’s manufacturing workers aren’t among the worst-hit. Manufacturing output rose 0.9% last month, its eighth straight increase. And factories have added jobs for eight months.
Manufacturers have benefited from a shift in spending toward goods — cars, electronics, furniture and the like — and away from travel and entertainment. Some of that pattern will likely reverse should the vaccines succeed in conquering the coronavirus. A WILLING FEDERAL RESERVE: One more potential tailwind for the Biden economy is a Federal Reserve that has made clear that it plans to keep its benchmark short-term interest rate pegged near zero through at least 2023. Chair Jerome Powell has also said the Fed will keep buying $120 billion in bonds a month until there is “substantial further improvement” in the economy. The Fed’s bond purchases are intended to keep long-term loan rates low to spur borrowing and spending.
THE NATION HAS REGAINED MORE THAN HALF THE 22 MILLION JOBS THAT WERE LOST TO THE PANDEMIC IN MARCH AND APRIL.