Data show the econ­omy isn’t roar­ing back

The Charlotte Observer (Sunday) - - Opinion - BY RIK W. HAFER Columbia Daily Tri­bune, Mo.

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.

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