Data show the economy isn’t roaring back
The Labor Department announced that almost 5 million jobs were added in June. On top of an impressive increase in May of nearly 3 million jobs, predictions of Vshaped recovery seemed inevitable.
Sadly, it isn’t going to happen.
Do economists always look on the gloomy side of life? No, we study the data and observe behavior to reach our conclusions. And right now neither is providing encouraging signals.
Employment numbers improved following the re-opening of stores, shops, restaurants and manufacturing facilities across the nation. This was expected after an unprecedented loss of 22 million jobs in March and April. But is it a dead cat bounce, the phrase used to describe temporary recoveries in stock prices after a significant fall? Is the nascent recovery sustainable?
Several factors suggest a temporary bounce.
Data from new coronavirus hot spots – Texas, Arizona and Florida – and other states suggest a sharp decline in economic activity also is taking hold. The Wall Street Journal reported that credit card use data from J.P. Morgan Chase reveals a significant drop in recent weeks. As coronavirus cases and hospitalizations increase, spending will slow. It is not a time for complacency.
The June employment data is a snapshot of the labor market in midJune. More recent data indicate that hiring slowed since then. Measures of economic activity also have plateaued. The economy is operating at levels higher than in March and April, though still far below the first of the year.
Some see this as a temporary pause in an ongoing recovery. That is a false hope, I fear.
“I hesitate to call this a recovery,” said Mary C. Daly, president of the Federal Reserve Bank of San Francisco at an event hosted by the Washington Post. More to the point, she added “ultimately the virus will determine the pace at which we can go.”
That brings me to my second point. No one wants a return to the shutdowns of March and April. But something similar is likely if our collective behavior doesn’t change to slow the re-emergence of the virus.
Once re-openings were permitted, pent up desires got the best of us. Many flocked to stores, beaches, and, where possible, bars. Officials from the CDC to governors to mayors cautioned us to follow the health protocols of distancing and wearing face coverings. Unfortunately, too many rejected these guidelines as government overreach, infringing on their personal rights.
The problem is that not following the protocols potentially inflicts third-party costs on everyone else. If you happen to be asymptomatic and mask-less, you unknowingly spread the virus to others. You in effect impose a cost on them that they did not want. It isn’t your right to make others ill.
Not wearing a mask should not be synonymous with the don’ttread-on-me attitude any more than our collective agreement that wearing clothes when grocery shopping is probably a good idea. Rejecting face coverings doesn’t reflect a stand against tyranny, but a disregard for others’ safety.
Rik W. Hafer is a professor of economics and director of the Center for Economics and the Environment, Hammond Institute for Free Enterprise.