Economist weighs in on US recovery
He says that ‘since about Thanksgiving growth has been flat’
It took me a while to figure out what was missing from an economist’s presentation about the outlook for Midwestern manufacturing and other sectors in coming months.
I paid close attention to Thursday afternoon’s hourlong virtual presentation by Thomas Walstrum, senior business economist at the Federal Reserve Bank of Chicago. The Calumet Area Industrial Commission hosted the presentation to give business owners and others a sense about how the economy is recovering from the COVID-19 pandemic.
Walstrum is better equipped to provide answers than most.
“My job is to keep track of the Midwest economy,” he said during the teleconference.
He’s responsible for the Federal Reserve System’s Region 7, which covers northern Illinois, southern Wisconsin, most of Indiana and all of Michigan and Iowa. It is one of 12 regions in the nation’s central banking system.
Walstrum and others collect information used to advise presidents, lawmakers and others about policy decisions affecting the world’s largest economy.
He’s had a busy year.
“We’re recovering from a really deep recession,” Walstrum said. “We are recovering from a massive economic shock.”
We all know the reason.
“This recession is a result of COVID-19,” Walstrum said.
Walstrum is a big-picture guy who provides a macro view assembled from many snapshots of state and local data points. He’s interested in everything from the price of a gallon of milk and the hourly wage for fast-food workers to the availability of steel and other raw materials used in manufacturing.
His host, the Calumet Area Industrial Commission, was formed in 1967 and promotes industrial expansion and retention
efforts in southern Cook County, on Chicago’s South Side and in Northwest Indiana.
Overall, the nation’s gross domestic product is down about 2.5% from pre-pandemic levels a year ago, he said.
The GDP measures the value of all goods and services produced in the United States. A
2.5% decline is not good, but it could be a lot worse.
A lot of areas shut down for weeks beginning last March because of concerns about COVID-19. People in some essential jobs kept working and companies kept paying many others, but there was a sudden and drastic halt to a lot of economic activity.
“Our GDP could have been 12.5% lower,” Walstrum said. “We dug this big hole and got out of it quite a bit.”
There was a big recovery in the third quarter of 2020 but things have pretty much leveled off since then, he said.
“Since about Thanksgiving growth has been flat,” Walstrum said. “The second wave put a big halt to further expansions.”
Some may not realize it, but many sectors of the economy are close to where they were a year ago, Walstrum said.
The restaurant, hospitality and entertainment sectors are a big exception. They’re still way down.
Anyone who works at or patronizes bars, restaurants, hotels, conference centers, theaters,
concert halls or other venues likely has firsthand anecdotal knowledge of the situation.
“Controlling the pandemic will end the recession,” Walstrum said.
At this time it’s worth sharing Walstrum’s disclaimer that viewpoints expressed in his presentation were his own and not those of the Federal Reserve.
To get a sense of how long it might take for the economy to fully recover, Walstrum said he looked at data about other pandemics.
“All of us have become armchair epidemiologists to some extent,” he said. “We’ve been figuring out how to reopen while limiting the spread of this virus.”
Manufacturing businesses have done a good job maintaining production and employment, he said.
“At this point you’ve learned how to make do and soldier on,” he said.
Bars and restaurants, however, are only halfway back to full employment.
“I think at this point we’re essentially waiting for the vaccine,” Walstrum said.
Economies operate on the principles of supply and demand, he said, with most recessions largely demand driven.
The so-called Great Recession that began in late 2008 was typical of most downturns, he said.
“There was a big run-up in home values,” Walstrum said. “People thought their homes
were worth more than they were. People lost wealth and cut back on spending.”
Households lacking spending money can trigger reduced demand that can lead to weaker pricing, higher unemployment and other negative economic effects.
The COVID-19 recession is unusual in that a lot of people and businesses are sitting on loads of money but have no way to spend it at the moment, Walstrum said. Government stimulus has helped many stay afloat, while others have pocketed the cash since they’re still working but unable or unwilling to go out dining, shopping and spending, he said.
“I, for one, have not eaten in a restaurant since the pandemic started,” he said. “Businesses and households are holding a lot more cash.”
As vaccines become more available and warmer weather increases outdoor dining and other activity, people will likely feel safer about going out and spending their money, he said.
“The leisure and hospitality sector has been dragging down other sectors,” such as travel and energy, he said.
This recession is unlike most others, he said.
“Unlike usual, manufacturing is not one of the hardest hit sectors,” he said. “I’m hearing from most of my manufacturing contacts that they’re really quite busy.”
In fact, manufacturers could likely increase their capacity and productivity were it not for a scarcity of skilled workers, he said.
That could lead to higher wages to attract employees. Higher wages could lead to inflation. The economy is a big, complex system with a lot of moving parts.
Walstrum’s bottom line was that the outlook for economic recovery is surprisingly strong.
“We’ve got to control the virus for the economy to fully recover,” he said. “When people get vaccinated will determine when economies start to look normal again.”
The U.S. economy is expected to show growth again by the second quarter of 2021, Walstrum said.
“We got growth back after three quarters. It was a very short recession,” he said. “We have another very big stimulus coming.”
Later, as I pondered Walstrum’s fact-filled presentation, it occurred to me what was missing. His presentation was completely devoid of any mention of anything political, whatsoever.
That’s a neat trick for an economist to pull off. James Carville, a strategist for President Bill Clinton, is credited with coining the phrase, “It’s the economy, stupid,” during the 1992 presidential campaign. His point was that the economy affected how people voted more than any other factor.
In an era when everything is politicized, including the pandemic, it was incredibly refreshing to listen to nothing but facts about the economy — a subject area that practically begs to be politicized.
Walstrum offered no judgments about where wealth should be shifted within the economy or what would happen if rich people paid more taxes or if minimumwage workers got raises. He just said, in essence, here’s what’s happening and here’s where it looks like we’re going.
After consuming so much information via traditional and social media that has been tainted with political spin, I’d forgotten what it was like to hear facts outside the context of a political agenda.
WASHINGTON — It sounded so ambitious at first blush: 100 million vaccination shots in 100 days.
Now, one month into his presidency, Joe Biden is on a glide path to attain that goal and pitching well beyond it to the far more ambitious and daunting mission of vaccinating all eligible adults against the coronavirus by the end of the summer.
Limited supply of the two approved COVID-19 vaccines has hampered the pace of vaccinations — and that was before last week’s extreme winter weather delayed the delivery of about 6 million doses. But the United States is on the verge of a supply breakthrough as manufacturing ramps up and with the expectation of a third vaccine becoming available in the coming weeks.
That means the act of delivering injections will soon be the dominant constraint, and it’s prompting the Biden administration to push to dramatically expand the universe of those who will deliver injections and where Americans will meet them to get their shots.
“It’s one thing to have the vaccine, and it’s very different to get it in someone’s arms,” Biden said Friday as he toured Pfizer’s manufacturing plant in Portage, Michigan.
Since their approval in December, more than 75 million doses of the two-shot-regimen Moderna and Pfizer vaccines have been distributed, of which
63 million have been injected, reaching 13% of Americans. Nearly 45 million of those doses have been administered since Biden’s inauguration Jan. 20.
The pace of deliveries of those vaccines is about to take off. About 145 million doses are set for delivery in the next 5 ½ weeks, with an additional 200 million expected by the end of May and a further 200 million by the end of July.
That’s before the anticipated approval by the Food and Drug Administration for emergency use of a third vaccine, from Johnson & Johnson. The single-dose J&J vaccine is expected to help speed the path to immunity.
But there is no massive stockpile of J&J doses ready to roll out on Day One.
“We’re going to be starting with only a few million in inventory,” White House COVID-19 coordinator Jeff Zients said this past week. Still, when combined with the anticipated increases in the other vaccines, the J&J doses could prove the pivotal advance in delivering enough shots for nearly all American adults by the end of June, at least a month earlier than currently anticipated.
The daily inoculation average climbed to 1.7 million shots per day last week, but as many as double that number of doses are soon expected to
be available on average each day. The focus of Biden’s team is now quickly shifting to ensuring those doses can get used, though the administration has resisted the calls of some health experts to publicly set a “moonshot” target for how many daily doses it hopes to deliver.
Biden first set his target of 100 million doses in 100 days Dec. 8, days before the first vaccines received emergency use authorization. By Inauguration Day, it was clear the U.S. was on course to attain that goal.
Dr. Leana Wen, an emergency physician and public health professor at George Washington University, said
she would like to see the administration commit to a more ambitious 3 million shot-per-day target.
“I want to see them put that stake in the ground,” she said.
The current pace of vaccination dipped markedly in recent days as winter weather shuttered administration sites in Texas and across the South, and icy conditions stranded supplies at shipping hubs in Kentucky and Tennessee.
One-third of the delayed doses have already been delivered, Dr. Anthony Fauci, the nation’s top infectious disease specialist, announced Sunday. The White House anticipates that remaining delayed doses will be injected by March 1 and that the daily pace of vaccinations will continue to climb.
Much of the increase, according to data from the Centers for Disease Control and Prevention, comes from people receiving their second dose of the Moderna or Pfizer vaccine. The pace of firstdose vaccinations, meanwhile, has been largely steady over the past several weeks, hovering around an average of 900,000 shots per day.
Increasing both the rate of first-dose administrations and the rate of overall vaccinations will be key to achieving herd immunity — estimated to require vaccination of about 80% of the population — in hopes of ending the pandemic and curtailing the emergence of potentially even more dangerous “mutant” strains of the coronavirus.
That means keeping demand high. The administration has expressed concerns about public surveys showing that tens of millions of Americans are reluctant to get the vaccine and it is stepping up public outreach to overcome that hesitancy as the U.S. death toll nears 500,000.
Dr. Cyrus Shahpar, the White House COVID-19 data director, said the administration is “focused on going out to communities and making sure people know these vaccines are safe and how they can get them, with a goal of vaccinating nearly all Americans,.”
The administration has also turned its focus toward identifying new delivery paths for the vaccines beyond those already used by states, including federally run mass vaccination sites.”