Recovery has begun with pain aplenty

July is here, but rather than being the first month of the 12th year of an expansion, it may turn out to be the first or second month of a recovery from the most dramatic downturn since the Great Depression.

The headline numbers of things like GDP, employment, initial claims, and retail sales are trumpeted and parsed to gain insight into this off-the-charts contraction. Employment plummeted by over 20 million jobs with the stay-at-home orders and closures in March and April. May and June brought a rebound, but the unemployment rate remains in the low double digits.

Retail sales collapsed and rebounded with closures and reopenings. Personal incomes were supported by massive increases in transfers, including stimulus checks and enhanced unemployment benefits due to expire at the end of this month.

We must remember that behind all these numbers are people: the fabric of whose lives has been torn asunder. The day-to-day interaction with friends, fellow employees, people with whom we do business has been throttled.

As the reopening process has unfolded, it has been accompanied by an increase in cases of COVID-19 that in some places have prompted a pause in reopening or renewed restrictions and intense public debate. The society is struggling to contain the virus and at the same time restore economic activity and diminish the economic damage.

Extended periods of no revenue or income mean that some firms will not survive in their pre-pandemic condition or at all. Debt burdens are growing with forbearance and deferral. The bankruptcy of household names is a drumbeat in the financial press — the same is happening to local institutions that make up a big part of our daily lives. At this point, the list of survivors and their condition is not known.

The decline in employment has disproportionately hit people with lower incomes and more limited education. For many people, working from home is not an option, and closed schools and child care are work stoppers.

The historical accident of medical insurance tied to employment for over half the population means that unemployment can mean loss of medical coverage. Millennials who got a shaky start in the labor force in the Great Recession are getting hammered again. We are all in the same pandemic, but we are not faring the same. For some it is an inconvenience and for others an unmitigated disaster. When this is over, there will continue to be pressure to re-examine the fissures in society’s safety net and the implications of inequality.

Policy makers have responded forcefully with the slashing of interest rates and enhanced lending programs by the Federal Reserve and fiscal support in the form of income support, forgivable loans and assistance for hospitals, and government entities. There will likely be more, as state and local government without the luxury of running deficits, confront decreased tax collections, increased costs for medical assistance and recent unrest in some areas. This implies tax increases or spending cuts that can be a drag on the recovery.

It is very likely that the recession, which followed the peak in February 2020, is technically over in that we are no longer declining, but make no mistake: The recovery will be a long and painful process. It will impact many individuals who through no fault of their own lost jobs, businesses, and a sense of comfort in their lives.

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With a half century of professional experience, John W. Mitchell is one of the Northwest’s most esteemed economists. He and his wife, Carol, reside in Coeur d’Alene.