May 4, 2020
While a quick recovery is possible, the evidence for a slower economic rebound in Utah is mounting.
This many job losses will take time to fix
More than 30 million Americans have filed new claims for unemployment benefits in recent weeks – a historically high rate of job loss. Additionally, real-time employment surveys suggest that the damage to the labor market may be worse than the delayed government estimates suggest.
Getting tens of millions of Americans back to work after a job separation will not happen overnight, for several reasons. Some, perhaps many, of the businesses that let these workers go will have gone out of business, unable to endure the economic storm. For businesses that do reopen, public demand for social distancing may force economic changes that will make some of them less profitable, and therefore unable to employ as many people. Some who lost jobs may have a difficult time finding a new one. These labor market dynamics point to a longer recovery.
Critical elements to recovery outside Utah’s control
In Utah, export of goods accounts for more than 8% of the state economy, and almost 25% of all jobs are connected to international trade. This means that Utah’s economic recovery is partially connected to what is happening outside of America’s borders.
Mexico has enacted a “sweeping … factory shutdown,” for example, that has disrupted supply chains for many American businesses. The average forecast from a survey of economists by Reuters predicted that world economy will shrink by 1.2% in 2020. The greater the international economic disruption from the pandemic, the more it is likely to hold back Utah’s economic recovery due to trade dynamics.
Industry response is not encouraging
Economists aren’t the only ones predicting a longer recovery. Leading businesses in some of the hardest-hit sectors of the economy foresee a “prolonged downturn.” Major airlines, for example, are predicting that it will take years before their companies are back to where they were before the pandemic because the drop-off in air travel – falling by 50% in some cases – has been so dramatic. A similar dynamic could play out in the similarly hard-hit restaurant industry and a retail industry where major players are declaring bankruptcy.
The fact that a longer timetable for economic recovery is being predicted by some economic analysts is one thing. But when major businesses – which, by necessity, must be part of any recovery – take actions in line with those analysts, it does not bode well for a quick recovery.
Some federal economic policies aren’t helping
Some federal economic policies – such as the recent increase to unemployment benefits – appear likely to prolong the economic recovery. This is because they may end up making unemployment pay better than paid work.
While the boost to unemployment benefits is temporary and slated to expire after four months, it could reduce some people’s willingness to return to work. This will make it harder for businesses to reopen and for the economy to grow. While there is some national policy discussion about reducing the size of this federal benefit to address this issue, the politics of doing so make this outcome unlikely.
This recent comment from Dr. Anthony Fauci is an important factor in recovery from the pandemic. But just because Utah citizens and lawmakers don’t control the pandemic timetable, that doesn’t mean we can’t do anything to influence economic recovery.
For instance, the pace of economic recovery will be sped along by the discovery and public dissemination of a safe and effective COVID-19 vaccine. Enacting state vaccine policy reforms today – such as allowing pharmacies to administer any FDA-approved COVID-19 vaccine, without an agreement or prescription from a licensed prescriber – could /mean quicker and broader access to any vaccine. This, in turn, would make Utah’s economic recovery that much stronger and more sustainable.
Utah policymakers should make this and other reasonable reductions to economic and health regulatory barriers a priority for upcoming special legislative sessions, so that recovery can occur quicker. Doing so will ensure that the future well-being of Utahns – physical and financial – is as secure as possible.
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