The Register Citizen (Torrington, CT)
The unpredictable COVID-19 economy
From my perch on a high-top in the Trinity Bar in downtown New Haven at 6 p.m. on Friday, it’s easy to see how the U.S. economy collapsed at a 32.9 percent rate this past spring, as the government reported Thursday.
The place holds 311 people inside — half of that in coronavirus rules — and more on the patio. But the crowd remained painfully thin as the evening unfolded.
“We’d have four guys in the kitchen at this hour,” said co-owner Shane Carty, who opened the Irish pub in 2015. “We’d have three bartenders and three waitresses on a Friday at happy hour.”
Instead, Carty manned the kitchen alone; one guy held sentry at the bar and one server handled every table. “I’m still paying the same amount of rent,” Carty mused.
True to the word of the dark-haired optimist who moved here from Dublin 26 years ago, things did pick up. The widely spaced tables on the patio filled up as the big screens inside showed the Yankees’ home opener against the Red Sox before zero fans at the stadium.
In short, an unpredictable pattern typical of the coronavirus economy.
Extreme hardship for some, business as usual, even healthy prosperity, for others. Anxiety for everyone over health, money or both.
And a wary eye on a mystery future that brings only one certainty: Life will never return to the way it was.
That’s pretty much the way it’s unfolding across Connecticut and the nation since the shutdown took hold at the end of the second week of March. It’s a collapse like no other, ordered but decidedly not orderly. We’re recovering, or maybe we’re still falling, with no benchmarks, no familiar milestones, no reliable forecasts.
Thursday’s early morning news — the unprecedented cratering of the value of all goods and services produced (the gross domestic product, or GDP) at a 32.9 percent annual rate in April, May and June — neither shocked nor relieved us. How could anyone, even those of us who watch such numbers for a living, react, or make predictions?
“It’s hard to look out too far,” said economist Fred McKinney at Quinnipiac University. “We don’t have a whole lot to fall back on.”
Biggest question of all: What happens if all this hunkering down seduces vast numbers of people to live simpler lives? Will we be happier but poorer? Will the land of opportunity lose its magic?
People are behaving differently and they might not go back to the way they lived,” said economist Donald Klepper-Smith of Connecticut and now, South Carolina.
With that palms-up view, it’s worth looking at key aspects of this recession — what we do know, how Connecticut will fare, how long it might take to emerge and most important, how coronavirus might change the very nature of well-being.
What about Connecticut?
Befitting the mystery of coronaeconomics, a hot debate surrounds the question of how Connecticut will fare in this recession.
On the positive side, we have the twin bulwarks of defense spending, which is up, not down; and the vast wealth of Fairfield County and the finance industry.
On top of that, there’s evidence of an influx from New York. That happens every year, as Connecticut sees a net gain averaging about 6,500 New Yorkers a year, when the moves in both directions are tallied up. We think it’s rising this year as people want to escape density for suburban lifestyles.
On the down side, Connecticut’s taxes and business costs remain high, without the payoff of a magnet city to attract young people. Long-term liabilities for health and public employee health and retirements, are among the highest in the country.
For now, the numbers show Connecticut’s job losses have been somewhat worse than the nation’s, but not alarmingly so. And the number of people collecting unemployment, currently about 250,000, is in the highest tier of states but not massively out of line with the national per-capita average.
“I think we’re going to bounce back faster,” said McKinney, director of the People’s United Center for Innovation & Entrepreneurship at Quinnipiac. “But that doesn’t mean that people in Connecticut are not going to suffer.”
One reason he cites: Connecticut residents in large numbers are well suited to work from home.
Klepper-Smith takes the opposite view with a similar caveat. “I would expect Connecticut to underperform relative to the nation,” he said. But he added, “In some areas Connecticut will do well.”
His biggest conern — people are still exiting, including himself, as an economist now based in South Carolina as well as Connecticut. “The state will be challenged until it is seen as a place that’s welcoming to businesses.”
We will not see reliable GDP numbers for the state — our part of that 32.9 percent decline — for months, long after the picture changes.
What actually happened?
A big move up or down in the quarterly national GDP would be 4 percent. Thirty-three percent? It can’t happen, and in a sense, it didn’t.
What happened, what the numbers show, is that the economy shrank by 9.5 percent in the AprilJune quarter, a bit more than $2 trillion, compared with the already shrunken January-March quarter. When the government adjusts for inflation and seasonal variations, it comes up with that headline number, a GDP decline at a 32.9 percent annual rate.
How do we know that? Since the U.S. economy is not a general store or a shoemaker’s shop, we can’t actually count the value of everything we make and sell. The GDP attempts to describe the nation’s $21.5 trillion ledger (it was that big in 2019, at least) by adding up four giant totals: personal consumption, business investment, government spending and net exports.
Coronavirus, of course, hammered consumption. Ask Shane Carty and his underemployed staff if you have any doubt about that. And if he was thinking of investing $300,000 to refurbish his banquet room and add more bathrooms — he didn’t mention such an idea — I think we all know where those plans would stand right now.
Multiply that by every business in the nation, large and small. And foreign trade has slowed this year for obvious reasons.
That leaves government spending, which, as it happened, increased tremendously. Federal government transfers — all that stimulus money — mushroomed by more than 75 pecent, a growth rate of $2.4 trillion if it were to last all year. That more than made up for the erosion of employees’ pay, which fell at an annual rate of $795 billion.
In other words, total personal income in the United States was way up, not down, even as millions of people lost their jobs and couldn’t buy food or pay the rent. Savings went up sharply, as happens in a recession because people are scared.
It’s hard to even imagine what would have happened without those extra $600-a-week unemloyment payments, the Paycheck Protection Program for small and midsize businesses and the stimulus checks of $1,200 to most Americans plus $500 per child.
That’s what Congress and President Donald Trump are looking at as they debate the next round of funding now that we’ve spent the first round and are nowhere near safety.
“They’re realizing this is the biggest economic shock since World War II,” Klepper-Smith said.
A new way of life
As Shane Carty headed back to the kitchen after we talked, he bumped elbows with a regular, New Haven Attorney Chuck Tiernan, the only person in the place in a business suit, at a table with three friends.
“The pandemic has created a situation where socializing is a thing of the past,” Tiernan says to me as he leaves, the pub still mostly empty.
Normally his table would be much more crowded. “We would come here every Friday, the whole group, and we’d have a happy hour and just have a grand old time.”
Will they return when it’s safe? “I can’t wait to get back to the way it was and I think the people I work with can’t and the city can’t,” he said.
A partner at Lynch, Traub, Keefe and Errante, he’s worried that offices will never refill with workers. “That’s going to kill the economy,” he said.
But that’s just one of many shifts we may see, some of them deeper than workplace locations.
McKinney, befitting his role at Quinnipiac, sees entrepreneurial opportunities as we see changes in how poeple work and live. Long term, he said: “I think it will be ultimately positive for GDP but just because it’s positive for GDP doesn’t mean it’s going to be positive for everybody.”
There’s that caveat again. Carty is thinking not just about his business but about the way of life that gave rise to it.
“I’m hoping the Irish bar will continue to be a place where people have a haven in the storm kind of thing. Have a conversation, have a laugh, have a good pint,” the Hamden resident said. “That’s how we all made lifelong friends here in Connecticut.”
Erica Taveris sees the immediate changes at farmers’ markets, where she criscrosses the state for her family’s Woodland Farm in Glastonbury.
Saturdays are slower, she said. “Weekdays in Darien, Westport, Old Greenwich ... all of those have been busier than usual. If they’re working from home, they can go to a farmers’ market during the week.”
Overall, it’s a wash, but everyone needs to worry about how changes will shake out. “This will be our normal until, who knows?”
Klepper-Smith talks a lot about that new normal, whatever it is. And it’s not about financial wealth.
“It’s not so much the output of the economy it’s the quality of life,” he said. “Net net, this could potentially be a good thing for the quality of life in the United States. “It’s not just about how much we’re consuming. We could be doing more with less.”