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In the first wave of hysteria surrounding the COVID-19 pandemic, The Atlantic writer Derek Thompson wrote an article on "The Four Rules of Pandemic Economics." In this article Thompson declares four rules that outline some of the truths and fallacies behind American economics. The first rule states, " 'Save the economy or save lives' is a false choice." From an economic standpoint, it was initially believed that states or cities that were harsh on social distancing guidelines would have a hard time rebounding their local economies. However, over time it has shown that states that were initially very strict on social distancing measures were some of the first to see a rebound whilst also keeping COVID-19 cases to a minimum. The second rule is, "Pay people a living wage to stop working." This rule comes from the idea that asking millions of Americans to stay home and do nothing is unjust. This would lead to those in low economic standings to fall even lower and those in a high economic standing to be okay but still filled with worry. This would split the wealth gap even further and do an injustice to the entire US economy. Rather than fall into this kind of misery, by providing a financial relief package to American citizens would aide in health efforts as well as economic efforts. Rule number three is to, "Build companies a time machine." As silly or unachievable as this sounds, there is possibility behind this claim. If financial institutions could support small and medium size businesses by providing stimulus packages to these businesses, they could shift their expenses to the future whilst still being able to pay their fixed costs in the mean time. These loans would be paid back in the future, once life returns to its new normal. Finally, the fourth rule is, "The business of America is now science." Meaning, to navigate through these rough waters and economic and social turmoil, knowledge becomes even more crucial. The root of these issues comes to the mere fact that there is a lack of knowledge surrounding COVID-19. There is no vaccine yet, socially people are provided with misinformation or no information at all, and in efforts to remain compliant with social distancing regulations, it is very difficult to amend these issues. The domino effect then shines the light on the fact that people need money to survive. This article shines the light on the economic and social injustices throughout the pandemic. As this article has been released in April of 2020, reflecting back now in August of 2020, it is evident that there are efforts to follow these rules but incredible varied by state.

Citation: Thompson, D. (2020, May 06). The Four Rules of Pandemic Economics. Retrieved August 20, 2020, from https://www.theatlantic.com/ideas/archive/2020/04/new-laws-pandemic-economics/609265/

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A playbook that should govern America's short-term reaction to the health crisis.

Simoul Alva

Editor's Note: The Atlantic is making vital coverage of the coronavirus available to all readers. Find the collection here.

"WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF."
With this tweet, President Donald Trump summarized a disturbingly common reaction to social-distancing measures. Texas Lieutenant Governor Dan Patrick expressed the same sentiment when he told Americans to "get back to work," even if doing so means more death. Fox News commentators, likewise, have argued that Americans should break free of the shackles of quarantine to reboot the economy.

Call it the gospel of growth: the notion that Americans cannot afford to save tens of thousands, even hundreds of thousands, of lives, if it means sacrificing a quarter or two of gross domestic product.
Read: Reopening the economy is pointless when cities are under siege
While this might sound like an economic argument, it enjoys little support among economists. In a recent University of Chicago survey of dozens of prominent economists, almost all of them agreed with the idea that the economy would suffer if the U.S. abandoned "severe lockdowns" while the infection risk remained high.

Still, the growth evangelists are right about one thing. Severe lockdowns produce a parallel human misery-with millions of unemployed Americans, thousands of looming bankruptcies, and extreme financial anguish.

What are the economic rules of this upside-down world, where opening the economy too soon produces mass death, but shutting it down for too long produces mass suffering?

Over the past few weeks, I've asked a version of this question to a dozen economists. What follows is an attempt to distill their thoughts into four rules that should govern our short-term reaction to the health crisis. It is not just a rebuke to the gospel of growth. It is a new playbook for pandemic economics.

Rule 1: "Save the economy or save lives" is a false choice.

Last week, a group of economists from the Federal Reserve and MIT published a paper on the 20th century's most murderous flu, the 1918 outbreak. Because the federal government in 1918 offered little if any economic assistance to suffering Americans, the local response from city leaders varied widely. Some places, such as New York and St. Louis, quickly ordered social distancing and other interventions, while others, such as New Haven and Buffalo, allowed public gatherings even weeks after the flu reached crisis levels. This variance gave researchers the ability to see which cities recovered the fastest after the outbreak.

"We were expecting that the areas with more [social distancing] would have a worse economy but less mortality," said Emil Verner, a co-author of the paper and a finance professor at MIT. But early and aggressive interventions both saved lives and triggered a faster rebound in several measures, such as job growth and banking assets.
Alan Lightman: The virus is a reminder of something lost long ago
The infamous trade-off between people and GDP? It doesn't exist-or, at least, it didn't in 1918. The reason, Verner told me, is that pandemics are "so, so disruptive that anything that you can do to mitigate that destructive impact of the pandemic itself is going to be useful." Without a healthy population, there can be no healthy economy.

This simple idea has some weird implications. "In a normal recession, you want to boost demand," said the Northwestern economist Martin Eichenbaum. "But we don't really want to boost demand in the very short run at all, right now. We don't want United to be flying full planes. We don't want restaurants serving food to dine-in customers. We want everybody to stay in and hold on."

It follows that we should-as incomprehensible as this may sound- hope for a deep, short recession, caused by a cliff dive in many forms of economic activity. That would be a clear signal that people have gone home and that the face-to-face economy has been shut down to limit the spread of disease.

"The question I would ask of our leaders is: What will you regret?" Eichenbaum said. "Will the government regret that it didn't save money in early 2020? Or will it regret that we let a viral infection kill millions of people, which also, by the way, led to the death of a lot of great companies? It's pretty obvious what the worst-case scenario is. You want to err on the side of saving lives."

Rule 2: Pay people a living wage to stop working.

In a pandemic, public gatherings are a kind of social pollution, and asymptomatic individuals who violate social-distancing rules are like factories that spew invisible carbon. "We can't ask people to internalize health risks on an individual basis any more than we can expect polluting factories to self-regulate," Eichenbaum said. "So governments have to freeze the economy and order people to stay home."
Read: The four possible timelines for life returning to normal
But asking millions of able-bodied workers to stop working creates a crisis of unemployment for which the word unprecedented does no justice. On Thursday, the government announced that 3.28 million people had applied for jobless benefits in the previous week. That's not just the highest weekly figure in recorded history; it's roughly five times larger than the highest-ever figure in recorded history. In seven days, unemployment benefits rose by as much as they did during the first six months of job losses in the Great Recession.

Once the government has put the economy into an artificial coma, it must keep the patient alive. The U.S. economic-relief package does so in a few ways. Washington will send to most households one-time payments of $1,200 per adult-plus $500 per child-and expand unemployment benefits, bumping up weekly payments for eligible workers, including independent contractors and the self-employed, by $600 for the next few months. The new law also delays tax filing, suspends wage garnishing among those who have defaulted on their student loans, and establishes a four-month eviction moratorium among landlords with mortgages from federal entities, such as Fannie Mae and Freddie Mac. This is a huge and kaleidoscopic response. But it still might not be enough.

Denmark and other northern-European countries are taking a different approach. Their governments are directly paying businesses to maintain their payrolls to avoid the sort of mass layoffs and furloughs that are already happening across the United States. The chief benefit of this approach is that restaurants, factories, and so on don't have to go through the bureaucratic rigmarole of firing thousands of workers and then rehiring them all when the economy bounces back (and those workers don't have to waste time applying for jobs, either). They're putting their entire economy in the freezer for three months.

Rule 3: Build companies a time machine.

The U.S. has about 6 million companies, according to the census, and 99.7 percent of them employ fewer than 500 people. Many of these small- and medium-size companies face extinction during the pandemic shutdown. While their income has evaporated, they still owe wages to workers and rent to landlords. This is a recipe for cascading bankruptcies.

If America's small businesses begin to fail en masse, the damage will spread quickly throughout the economy. Just imagine the closed wine bars in Manhattan. Without money from thirsty New Yorkers, they can't afford to buy more bottles from family wineries. Without commercial buyers, those wineries can't buy new fruit from local grape growers, who can't pay tractor manufacturers for new equipment. One sector's problem quickly becomes every sector's problem.
Read: How the pandemic will end
Financial markets may experience a parallel domino effect. If thousands of restaurants suddenly can't make rent, their property owners might default on mortgage payments. When their banks suffer catastrophic losses, the financial system will seize up because nobody wants to lend anybody money. This is how a pandemic recession could become the Great Depression of the 21st century.

How do we begin to solve this impossible problem? The Federal Reserve has said it will pull all available levers to keep the financial system alive, by buying up government debt, corporate debt, and a variety of asset-backed securities. But something more will be needed to save America's businesses.

"We have to build companies a time machine," Justin Wolfers, an economist at the University of Michigan, told me. He isn't talking about the H. G. Wells contraption. He's referring to anything-including grants, cheap loans, and debt relief-that would allow companies to shift their expenses to the future.

"My local burrito shop, which used to be a thriving business, could go belly-up any day now," Wolfers said. "But in the post-coronavirus world, it should be a thriving business again. What that burrito business needs is what every business needs right now-a time machine to go from the present pandemic to the future."

In the U.S. economic-rescue package, that time machine looks like $370 billion in low-interest loans backed by the government. Many businesses won't have to pay back a cent if they use the cash to make basic expenses, like payroll or rent, and don't lay off workers. As Slate's Jordan Weissmann explains, private banks will make the loans to local companies with whom they already have a relationship, and the Small Business Administration will guarantee those loans-at least, until they run out of the roughly $370 billion.

Most economists I spoke with had the same reaction to the economic-rescue plan: Nice idea, too late, and too small. "This should have been passed three weeks ago, and it should have been much larger," said John Lettieri, CEO of the Economic Innovation Group, a think tank and an advocacy group. Steven Hamilton, an economist at George Washington University, wrote that if the bill is intended to cover 11 weeks of payroll for all companies with fewer than 500 employees, the right figure should be closer to $600 billion. When the U.S. Senate returns to draft follow-up legislation, small-business relief will have to be at the top of the list.

Rule 4: The business of America is now science.

The new rules of pandemic economics are meant to guide U.S. policy during a period of weeks or months-not quarters or years. A three- or four-month freeze is one thing, but a full year of isolation and economic inactivity is untenable.

That brings us to the $100 trillion question: How do we get out of this? A lot more science.
Liz Neeley: How to talk about the coronavirus
Our lack of knowledge about the virus is our greatest weakness in combatting it. Not knowing who has the virus, or who is most susceptible, contributes to higher infection rates. Not knowing who has recovered from, and built immunity to, the virus delays our ability to treat individuals, or release select individuals from isolation. The possibility that the virus is anywhere means that we have to shut down economic activity everywhere. The road back to normalcy is through more clear and public information.

First, we need more tests, which can tell us where the virus already is. As The Atlantic's Ed Yong explains, that means we need more masks, more nasopharyngeal swabs for collecting samples, more extraction kits to retrieve the virus's genetic material, and more trained people to administer the tests.

Second, we need sophisticated tracing technology to tell us where the virus is spreading. "Contact tracing" means reaching out immediately to people who came into contact with an infected person, testing them, and recommending isolation if they test positive. While some countries' tracing methods draw on mobile data in a way that might make Americans uncomfortable, Germany is looking to deploy a national app that has (for now) won approval from its health minister and data-protection commissioner.

In addition to coordinating a test-and-trace strategy, Washington should train its prodigious energies toward defeating the disease as fast as possible, by establishing billion-dollar prizes for vaccine and antiviral breakthroughs and by relaxing regulations to accelerate the approval of new treatments. After weeks of delay, the administration is finally using the wartime Defense Production Act to force manufacturers to produce ventilators and surgical masks.

We need to get people money, or they will die. We need to get companies cash, or they will die. But if we don't clear the way for health-care workers to treat the sick, or for scientists to treat the disease, people and companies are going to die, anyway. There is no such thing as a normal economy until we contain the virus. But if we can't contain the virus quickly, we might not have anything normal to return to.

We want to hear what you think about this article. Submit a letter to the editor or write to letters@theatlantic.com.

Derek Thompson is a staff writer at The Atlantic, where he writes about economics, technology, and the media. He is the author of Hit Makers and the host of the podcast Crazy/Genius.

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economic rules of this upside-down world

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recent university of chicago survey of dozens

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A playbook that should govern America's short-term reaction to the health crisis. Editor's Note: The Atlantic is making vital coverage of the coronavirus available to all readers. Find the collection here. "WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF." With this tweet, President Donald Trump summarized a disturbingly common reaction to social-distancing measures.

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In an article published by CNBC on August 20th, 2020, author Fred Imbert headlines with "US weekly jobless claims jump back above 1 million." In a brief synopsis, the US Department of Labor stated that initial unemployment claims for the week ending August 15th, 2020 demonstrate that 1.106 million Americans filed for unemployment. This exceeds the expectations of economists who predicted 923,000 people would file for unemployment. Because the claims for unemployment were much higher than predicted, the public, economists and policymakers struggle to move forward with a new pandemic stimulus package. Previous to this spike, the requests of unemployment benefits was in a downward trend.

This article demonstrates how the pandemic is no where near being over in terms of the economy. People are desperate to be able to afford their basic necessities. Moreover, in most states, the unemployment package provides more financial aide than working a minimum wage job. Additionally, as people are concerned with their health, it is crucial to consider that even if citizens were capable to return to work, they may want to limit their exposure to COVID-19. Finally, the current job market is not abundant with jobs for most industries, leaving those with higher education and those with entry-level skills unable to get jobs.

Citation: Imbert, F. (2020, August 20). U.S. weekly jobless claims jump back above 1 million. Retrieved August 20, 2020, from https://www.cnbc.com/2020/08/20/weekly-jobless-claims.html

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The number of people filing for unemployment benefits last week was greater than expected, raising concern about the state of the economy as lawmakers struggle to move forward on a new coronavirus stimulus package.

The Labor Department said initial jobless claims for the week ending Aug. 15 came in at 1.106 million. Economists polled by Dow Jones expected a total of 923,000. Initial claims for the previous week were also revised higher by 8,000 to 971,000.

Last week's spike in claims came as Democrats and Republicans struggle to move forward on a new coronavirus stimulus bill. Democratic lawmakers want to keep an additional unemployment benefit of $600 per week that was included in previous aid package. Republicans, meanwhile, have indicated they want to extend the additional benefit at a lower rate.
This is breaking news. Please check back for updates. Subscribe to for exclusive insights and analysis, and live business day programming from around the world.

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U.S. weekly jobless claims jump back above 1 million

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The number of people filing for unemployment benefits last week was greater than expected, raising concern about the state of the economy as lawmakers struggle to move forward on a new coronavirus stimulus package. The Labor Department said initial jobless claims for the week ending Aug. 15 came in at 1.106 million.

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The US Postal Service has been at the cornerstone of connecting individuals across the country for decades. Now more than ever, Americans are paying attention to the USPS. In a podcast released by Keith Romer and Alexi Horowitz-Ghazi under the outlet NPR the discussion of what went wrong and how to fix it is discussed. There has been a long standing battle between the public service sector and private enterprise. This conflict has driven the revenues of the USPS straight into the ground. Newest Postmaster General Louis DeJoy has put a plan in place to cut overtime, remove mailboxes and delaying mail. There are ethical implications to removing mail boxes, especially when it is likely that the 2020 Presidential election will be by mail-in ballots. Reducing access to mailboxes and slowing down that mail service is in turn, taking the way the rights of American citizens.

In a personal reflection of this podcast, it becomes clear that the US economy is focused on large corporations rather than providing public services that part of government aid pays for as well as people purchasing stamps and other mail services. Although there is a claim that the USPS is obsolete in modern times, especially with major corporations like Amazon becoming increasingly popular. However, if the USPS is gone, government official mail is much harder to send and receive. In a mandate to reduce government spending on the USPS, the government required the USPS to act as a business itself. However, the USPS must get approval to raise prices, open new offices, and place new mailboxes. This idea is a lose-lose for the USPS, all in an effort to privatize mail delivery for good.

Citation: Romer, K., & Horowitz-Ghazi, A. (Directors). (2020, August 22). Crisis at the Post Office [Video file]. Retrieved August 22, 2020, from https://www.npr.org/2020/08/21/904855736/crisis-at-the-post-office

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subscribe to Planet Money podcast

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As a country, we're all suddenly paying attention to the Postal Service in a way we haven't in years. Which is probably long overdue. Because the United States Postal Service has been in a slow-motion crisis for decades.

The fight over the US Postal Service is a lot bigger and goes back a lot further than the appointment of Louis DeJoy. It's a fifty-year-old battle between public service and private enterprise.

Today on the show, we try to figure out what's gone wrong with the post office. And if there's any way to fix it.
Want more mail? Subscribe to Planet Money's Newsletter

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Crisis At The Post Office : Planet Money

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subscribe to Planet Money podcast subscribe to Planet Money podcast As a country, we're all suddenly paying attention to the Postal Service in a way we haven't in years. Which is probably long overdue. Because the United States Postal Service has been in a slow-motion crisis for decades.

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Over the course of the pandemic, the US has faced one of the sharpest inclines in unemployment since the Great Depression. In an article by The Atlantic reporter Joe Pinsker, statistics show that unemployment reached 15% in the last month. At the start of the COVID-19 pandemic, US legislatures funded the CARES Act which provided households with some financial relief. This act provided people with $600 a week for expenses such as rent and food. This help cut off last month and Americans are facing a crisis of potential starvation and evictions. At the time of the Great Depression, Americans relied heavily on government support. This time around, however, there's been some efforts, but not enough to sustain the people. Americans are very concerned as to how they are going to make ends meet without the weekly government assistance. Although US legislatures are pledging to provide more assistance, it may not be enough or in good time. This article demonstrates the short-comings and lack of empathy the higher class has towards the lower income classes. In today's times, money is the key to survival. Without some assistance, this recession could be deadly.

Citation: Pinsker, J. (2020, August 23). The Pandemic Recession Is Approaching a Dire Turning Point. Retrieved August 24, 2020, from https://www.theatlantic.com/family/archive/2020/08/600-week-pandemic-unemployment-families/615580/

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This much-needed support was working. "By and large, the CARES Act, between the [$1,200] economic-impact payments and the unemployment [supplement], in particular at the family level, did a lot of heavy lifting toward keeping material hardship and poverty at bay," Beth Mattingly, an assistant vice president in regional and community outreach at the Federal Reserve Bank of Boston, says. One man in Pennsylvania told The New York Times, "That extra $600 is what's been keeping us alive."

But then the support stopped. The additional $600 of weekly assistance expired in late July, and the one-off stimulus payments are at this point "a relic of history" for many families, Mattingly told me.

The extra $600 a week had been an immense help to Henderson Belle, a 58-year-old in Jamaica, New York, who was furloughed from his job at an airport Starbucks in late April. The CARES Act funds helped him cover expenses-including rent, food, and an auto-loan payment-for himself and his 31-year-old daughter, who is disabled.

But now that the supplemental assistance has been cut off, he's not sure he'll be able to make ends meet this month and beyond. "It is very hard and scary," Belle, a member of Unite Here Local 100, a union representing food-service workers in the New York City area, told me. "I know there's going to be some things [in my budget] that I'm going to be stuck on." He'd like to return to his Starbucks job, but he doesn't know if or when he'll be able to do that, so he might start looking for other employment soon. The next few months are uncertain for him. "That is why I put God in front, and God will make a way," he said.
Read: The pandemic proved that cash payments work
Many Americans are now, like Belle, bracing for financial shortfalls and potentially huge consequences. "Absent federal policy, we're going to see more housing instability as well as food insecurity, probably some utility shutoffs," Mattingly said. "I'm frankly terrified."

Congress might pass more pandemic-assistance legislation, but likely not before next month, at the earliest. In the meantime, President Donald Trump issued an executive order two weeks ago pledging more assistance, though the logistics of the order are unclear, the pile of money it sets aside is relatively small, and its rollout has been halting. An additional $300 a week of federal money has already been sent out to some residents of Arizona, but most states still haven't implemented the new program yet ( if they ever will). Even if the supplemental $300 of aid does go out to more of the country, Mattingly told me she doesn't think it will sufficiently help American families.

The comparatively meatier provisions of the CARES Act, helpful though they were, didn't completely protect American families from the pandemic's financial harms or eliminate the hardships that predated it. As Mattingly noted in a recent paper co-authored with researchers from the University of Michigan, the share of households reporting that they couldn't afford food during the pandemic has been more than one in six, and roughly a tenth of adults have said they haven't been able to pay rent or their mortgage on time. These amount to millions of family-level catastrophes.

"I think people who were not doing well before [the pandemic aren't] doing much better" now, Mattingly said. She's particularly concerned about the pandemic recession's impact on households with kids and Black and Hispanic workers, who as a group have suffered bigger employment hits than white ones.

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The Pandemic Recession Is Approaching a Dire Turning Point

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This much-needed support was working. "By and large, the CARES Act, between the [$1,200] economic-impact payments and the unemployment [supplement], in particular at the family level, did a lot of heavy lifting toward keeping material hardship and poverty at bay," Beth Mattingly, an assistant vice president in regional and community outreach at the Federal Reserve Bank of Boston, says.

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In an article posted on MarketWatch, author Greg Robb headlines that the Fed adopts a new strategy to allow higher inflation and welcome strong labor markets. A new policy was agreed upon by all seventeen Fed officials. This policy would allow inflation to run over 2% for an unstated period of time. The method of letting the inflation rate run high is known as the average inflation target. Economists were surprised at this policy as the works of this plan were only briefly mentioned in July. Historically, in the past two decades, American and international markets have begun to save more and invest less. The result being that banks have had to alter their strategies because interest rates are so low. Arguably, this strategy is put in place as an academic strategy and even somewhat experimental.

Citation: Robb, G. (2020, August 27). Fed adopts new strategy to allow higher inflation and welcome strong labor markets. Retrieved August 27, 2020, from https://www.marketwatch.com/story/fed-unanimously-adopts-new-strategy-widely-seen-as-leading-to-easier-policy-2020-08-27?mod=economy-politics

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The Federal Open Market Committee on Thursday announced that it has approved changes to its written policy strategy that are widely seen as leading to an easier monetary policy stance over time.

In a statement, the Fed said that it has adopted an "average inflation target" and recognizes the benefits for a strong labor market.

The announcement of the new strategy was timed for Fed Chairman Jerome Powell's speech to the Jackson Hole economic symposium, to be held virtually this year.

In the past, Fed chairman have used the conference to make major policy announcements.

"It is hard to overstate the benefits of sustaining a strong labor market, a key national goal," Powell said in his prepared remarks discussing the policy shift.

That statement would not have come from a central banker a generation ago. In the past, strong labor markets meant that higher inflation was just around the corner and a reason to tap the brakes and raise interest rates.

It is now the Fed's view that "a robust job market can be sustained without causing an outbreak in inflation."

The Fed's strategy retains 2% annual growth of inflation as a target but the Fed said it "seeks to achieve inflation that averages 2% over time."

"Following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time," the new policy says.

Global oversupply has created deflationary forces that have bedeviled foreign central banks as the traditional tool of cutting interest rates to spur employment no longer is effective. Too low inflation saps energy from economies. Foreign central banks have pushed their benchmark interest rates into negative territory to try to spur demand.

This is a circumstance the Fed wants to avoid.

"We have seen this adverse dynamic play out in other major economies around the world and have learned that once it sets in, it can be very difficult to overcome. We want to do what we can to prevent such a dynamic from happening here," Powell said.

Stocks were set to open lower ahead of the Fed chairman's speech. The Dow Jones Industrial Average was up 84 points on Wednesday.

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headline|fed unanimously adopts new strategy

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Fed unanimously adopts new strategy, widely seen as leading to easier policy

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The Federal Open Market Committee on Thursday announced that it has approved changes to its written policy strategy that are widely seen as leading to an easier monetary policy stance over time. In a statement, the Fed said that it has adopted an "average inflation target" and recognizes the benefits for a strong labor market.

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As the US continues through the COVID-19 pandemic and looming recession, a series of additional lay-offs hit Americans hard. One of the hardest hit industries as a result of the pandemic is the travel industry. Airline and hotel chains made announcements that they would have to lay-off more than 40,000 employees. Moreover, universities have also stated that they would have to furlough employees. This additional hit to the economy demonstrates that sustainability and recovery are not in the near future. In better news however, the private sector is hiring up to 250,000 temporary workers. These jobs should last only through the end of 2020, however. The next financial aid bill is still in a deadlock between the Republican and Democrats in Congress. There has been no agreement, leaving Americans without any government aid.

Citation: Bartash, J. (2020, August 29). New wave of layoffs points to fresh hurdles for U.S. economic recovery heading into the fall. Retrieved August 29, 2020, from https://www.marketwatch.com/story/new-wave-of-layoffs-points-to-fresh-hurdles-for-us-economic-recovery-heading-into-the-fall-2020-08-29

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A flurry of fresh layoffs and furloughs in the U.S. is posing a new hurdle for a fragile economic recovery whose momentum appears to have flagged.

A handful of large airline carriers and hotel chains such as American Airlines and MGM Resorts said this week they would lay off or furlough more than 40,000 employees as they confront a massive loss of customers due to the coronavirus pandemic. Many colleges and schools also plan to reduce staff and more bad news is probably on the way.
Read: Consumer spending slows in July as economic recovery loses some momentum
The new fissures in the economy suggest the easy growth in May and June after the states allowed businesses to reopen is giving way to a more protracted recovery whose progress is likely to be more uneven.

"The layoffs add to concerns the market has about the sustainability of the pace of the recovery," said senior economist Sam Bullard of Wells Fargo.

Economic growth slowed in July and is likely to do so again in August. The economy is still recovering, to be sure, just not as fast as it was.

"That's the point I been making to people. Now the hard part starts," said chief economist Richard Moody of Regional Financial. "August is going to be a transitional month."
See: MarketWatch Economic Calendar Read: U.S. initial jobless claims fall to 1 million in late August and resume downward trend
Wall Street will look for more evidence of cracks in the recovery in the upcoming U.S. jobs report for August next Friday.

The economy may have added about 1.6 million jobs, economists forecast, just a touch lower than the 1.76 million gained in July. The unemployment rate is seen falling to 9.9% from 10.2% in July.

The more important number to watch, though, is private-sector hiring. The government added up to 250,000 temporary Census workers in August while educational employment could surge largely because of seasonal-adjustment quirks tied to the pandemic.
Read: Did the expired $600 federal jobless benefit keep people from going back to work?
Private-sector employment is expected to increase by slightly more than a million. The recently announced layoffs, for their part, wouldn't show up until the September employment report.

What remains to be seen is whether Democrats and Republicans in Congress break a deadlock over the next financial-aid bill before most of those workers lose their paychecks.

The White House has sent signals it wants to bolster airlines and other industries that have suffered the greatest during the pandemic. Previously the government had helped airlines keep employees on payrolls regardless of whether they were working through massive federal subsidies that recently expired.
Read: 'The recovery is going to be a slow one,' Fed's Mester says
If there's a few silver linings, consumer spending and manufacturing production have actually grown faster than expected and shown little sign of fading. So far there's little evidence the loss of tens of billions in dollars in federal aid for the unemployed has caused households to scale back much.

Take automobile and home sales. They rebounded sharply after the first few months of the pandemic and are still going strong.

Typically demand for expensive goods like new cars, trucks and houses taper off when the economy stumbles and consumers worry about their jobs. That isn't happening right now.

Still, most economists are skeptical the U.S. can grow much faster without another federal relief package that keeps people in the jobs or helps stoke enough demand to encourage businesses to avoid layoffs.

"Consumers and businesses are going to remain cautious heading into the fall," Bullard said. "Given all the headwinds, it's going to take time for the economy to come fully back."

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first_publish_headline|new wave of layoffs points to fresh hurdles for u.s. economic recovery heading into the fall

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headline|new wave of layoffs points to fresh hurdles for u.s. economic recovery heading into the fall

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New wave of layoffs points to fresh hurdles for U.S. economic recovery heading into the fall

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A flurry of fresh layoffs and furloughs in the U.S. is posing a new hurdle for a fragile economic recovery whose momentum appears to have flagged. A handful of large airline carriers and hotel chains such as American Airlines and MGM Resorts said this week they would lay off or furlough more than 40,000 employees as they confront a massive loss of customers due to the coronavirus pandemic.

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In a US News article by Senior Editor, Susannah Sinder, the headlining question is posed: Is Unemployment Insurance Retroactive? After thousands of Americans lost the $600 government aide at the end of July, many were left will absolutely no source of income. Now, with increasing unemployment rates, Americans are not receiving their benefits right away. However, from the date unemployment is filed, these benefits can be dated back to eligibility. This retroactive aide can also makeup for the delays in financial assistance. These payouts however, vary by state and no household is guaranteed to receive retroactive insurance. As a method to ensure that this may occur, Snider offers the advice to contact state legislatures to make this official.

Through this article it becomes more and more evident that Americans are struggling in every state collect their unemployment benefits. Because the unemployment rate is so high and only increasing, there are significant delays and this is concerning for those who are lower income or have no savings.

Citation: Snider, S. (2020, September 1). Is Unemployment Insurance Retroactive – And How Does It Work? Retrieved September 01, 2020, from https://money.usnews.com/money/personal-finance/family-finance/articles/is-unemployment-insurance-retroactive-and-how-does-it-work

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In an article playing on pathos released by the New York Times, there is more evidence that the low income, service industry are the ones that are getting hit the hardest as the COVID-19 pandemic carries on. With more and more white collar workers being subject to remote working and collaboration, the service and hospitality industries are falling way behind. In cities, the majority of the population work minimum wage jobs at retailers, restaurants and hotels. Because travel and frankly, indulgement is no longer permitted due to the stay at home orders. The employees of these industries are being laid off and left without pay or potential benefits. This is increasing the wage gap in cities especially. Although the vast improvements on remote working and collaboration aid major corporations and the white collar jobs, this is detrimental to the travel industry. With lasting solutions to removing the extra cost, time, and reducing travel, millions of Americans could have to change professions entirely.

Citation:  Porter, E. (2020, September 04). The Service Economy Meltdown. Retrieved September 04, 2020, from https://www.nytimes.com/2020/09/04/business/economy/service-economy-workers.html

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David Engelsman abruptly lost his job as a restaurant server in Portland, Ore., in March. Now he is fighting to get health insurance for his family. Credit... Will Matsuda for The New York Times

As companies reconsider their long-term need to have employees on site, low-wage workers depending on office-based businesses stand to lose the most.

David Engelsman abruptly lost his job as a restaurant server in Portland, Ore., in March. Now he is fighting to get health insurance for his family. Credit... Will Matsuda for The New York Times

March 16 was the last day David Engelsman walked into the Jackrabbit, an acclaimed restaurant at the boutique Duniway Hotel in downtown Portland, Ore. The lead server on morning duty, Mr. Engelsman was told before his shift started that his job was no longer needed. He left early, at 10:30 a.m. The restaurant didn't reopen the next day.

A total of 330 workers at the Duniway and another Hilton property across the street have been let go since then. With two autistic children, a wife with a severe heart condition and now no health insurance, Mr. Engelsman has devoted much of his time to the fight by his union, UNITE HERE, to get Hilton to make health-plan contributions for laid-off workers until the end of the year. "We're left standing here with nothing," he said. "I know I sound dramatic, but it is dramatic."

With 11.5 million jobs lost since February and the government's monthly report Friday showing a slowdown in hiring, stories like this have become painfully common. When companies dispatched office staff to work remotely from home, cut business trips and canceled business lunches, they also eliminated the jobs cleaning their offices and hotel rooms, driving them around town and serving them meals.

For this army of service workers across urban America, the pandemic risks becoming more than a short-term economic shock. If white-collar America doesn't return to the office, service workers will be left with nobody to serve.

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The worry is particularly acute in cities, which for decades have sustained tens of millions of jobs for workers without a college education. Now remote work is adding to other pressures that have stunted opportunities. The collapse of retailers like J.C. Penney and Neiman Marcus has wiped out many low-wage jobs. The implosion of tourism in cities like New York and San Francisco will end many more.

Maria Valdez, a laid-off housekeeper at the Grand Hyatt in San Antonio, is scraping by with three children on a $314 weekly unemployment check. Kimber Adams, who lost her job as a bartender at the Seattle-Tacoma International Airport, is pinning hopes on her "Plan B" to become a phlebotomist. Waldo Cabrera, let go from his job cleaning the cabins of American Airlines jets at the Miami airport, hopes an offer to drive a tanker truck in Texas will wait until he can move at the end of the year. "Perforce I have to leave here," he said.

Mari Duncan is relatively lucky. She is still drawing a paycheck, even though her job marinating meats and cooking soup at Facebook's Seattle campus ended when Facebook sent its managers and engineers to work from home. But she fears that her deal - Facebook is still paying its food service contractor so it can cover payroll - can't last forever. "When I saw a story break about how Facebook will stay remote until July of 2021," she said, "I freaked out a little bit."

Every one of them is itching to get back to work. But a fear is budding that even when the pandemic has passed, the economy may not provide the jobs it once did.

"Some law firms are finding that it is more productive for their lawyers to stay at home," said Kristinia Bellamy, a janitor who was laid off from her job cleaning offices at a high-rise housing legal firms and other white-collar businesses in Midtown Manhattan. "This might be the beginning of the end for these commercial office buildings."

Consider Nike's decision in the spring to allow most employees at its headquarters in the Portland area to work remotely. Aramark, which runs the cafeteria and catering at Nike, furloughed many of its workers. With no need for full services anticipated "for an undefined period," Aramark says, 378 employees - waiters, cooks, cashiers and others - now face permanent layoff on Sept. 25.

The question is whether dislocations like this will be only temporary. About one in five adults of working age who do not have a college degree live in the biggest metropolitan areas - in the top quarter by population density - according to estimates by David Autor of the Massachusetts Institute of Technology. Most are in service industries that cater to the needs of an affluent class of "knowledge workers" who have flocked to cities in search of cool amenities and high pay.

And having discovered Zoom, what company will fly a manager across the country for a day's worth of meetings? A lasting reduction in business travel will endanger the ecosystem of hotel and restaurant workers serving corporate travelers.

Jonathan Dingel and Brent Neiman of the University of Chicago have calculated that 37 percent of jobs can be done entirely from home. Those jobs tend to be highly paid, in fields like legal services, computer programing and financial services. And they tend to concentrate in affluent areas like San Francisco, Stamford, Conn., and Raleigh, N.C.

Recent research by the economists Edward Glaeser, Caitlin Gorback and Stephen Redding found that when Covid-19 struck, activity - measured by the movement of cellphones in and out of ZIP codes - declined much more sharply in neighborhoods where a larger share of residents had jobs that could potentially be done from home.

The economists at Opportunity Insights in Cambridge, Mass., estimate that in the year to Aug. 9, consumer spending in high-income ZIP codes declined 8.4 percent, with the impact felt disproportionately by industries that rely heavily on the nation's low-wage labor force: restaurants and hotels, entertainment and recreation services.

LEISURE AND

HOSPITALITY WORKERS

LEISURE AND

HOSPITALITY WORKERS

Share of jobs that can

be done from home

A lasting change in the behavior of the high-wage layer atop urban labor markets would have an outsize effect. Many service jobs that held on in the face of globalization and widespread automation may not survive.

"I don't know what a less-skilled worker does in West Virginia," said Mr. Glaeser, an urban economist at Harvard University. "If urban service jobs disappear, the whole of America becomes like West Virginia."

Nike isn't Portland's biggest private employer. That's Intel, the semiconductor giant, which employs 20,000 mostly well-paid people there. It is a pillar of a high-tech cluster known as the Silicon Forest stretching between Hillsboro and Beaverton on the western edge of the city. And it supports a network of contractors and subcontractors whose income trickles down through the area's economy.

Only about 40 percent of Intel's employees are working on site - those indispensable to its vast chip-making plants - and remote work is set to continue until at least next June. Even after that, said Darcy Ortiz, Intel's vice president for corporate services, "there will be more flexibility in the way we work."

For businesses that rely on Intel's footprint, that may not be great news. "Intel has sustained us," said Rick Van Beveren, a member of the Hillsboro City Council who owns a cafe and a catering business that remain mostly shuttered. "We cater to a constellation of businesses around Intel."

The same type of decision is being made around the country. Scott Rechler, chief executive of RXR Realty, which owns over 20 million square feet of office space in New York City, estimates that every office worker sustains five service jobs, from the shoeshine booth to the coffee shop. Yet only about 12 percent of his tenants are in the office.

Restaurant Associates - the food-service conglomerate operating cafeterias at companies including Google and The New York Times, and restaurants at the Smithsonian and the Quadrangle Club of the University of Chicago - employed 10,500 workers before the pandemic. Though the company has been scrambling for new business since then - to feed health workers, or to make home-delivered meals - Dick Cattani, the chief executive, said that only some half of them are working today.

Of course, a lot of the urban economy that employs low-wage service workers was shut down by city and state governments hoping to contain the pandemic. The risk of infection is also keeping many people at home. Presumably these fears and restrictions will relax once a vaccine or a treatment for Covid-19 is developed.

In New York, for instance, Amazon, Facebook and Google expect to add thousands more workers in the city. "It will take time to recover," Mr. Rechler said. "Many small businesses may not survive. There will be some urban flight. But that will be backfilled by the next young bright cohort of people who want to come to New York."

Mr. Cattani sees this as an opportunity to buy new businesses. And the company is expanding into hospitals, to feed patients and their visitors. "Covid can't change the underlying energy of creative workers in a single place," said John Alschuler, chairman of the real estate advisory firm HR&A Advisors.

A large share of the American labor force hopes he is right. Mr. Engelsman, the restaurant server in Portland, has no idea how he will pay for his wife's medication when a month's dose of beta blockers alone costs $580. Mr. Cabrera, the American Airlines cabin cleaner, in Miami had to dip into the insurance money he got after somebody crashed into his car, and is now carless. Ms. Valdez, the hotel housekeeper in San Antonio, was called back for the Grand Hyatt's reopening this month, but says she can't return until school starts because she must care for her 11-year-old son. She worries that Hyatt will try to make do with fewer cleaning workers and not hire everybody back.

Angel Carter, who was laid off in March from her job cleaning three floors in Philadelphia's Center City, notes that janitors at work are putting their health at risk. They are more important than ever - given the pandemic - because offices must be cleaned extra thoroughly. She argues that the job these days merits hazard pay. But above anything else, Ms. Carter said, "I'm praying that they do open back up."

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As companies reconsider their long-term need to have employees on site, low-wage workers depending on office-based businesses stand to lose the most. David Engelsman abruptly lost his job as a restaurant server in Portland, Ore., in March. Now he is fighting to get health insurance for his family. Credit...

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Charles Riley, A CNN Business reporter argues that a vaccine for COVID-19 will not cure the global economy. The implications thus far have been drastic and will take time and government support to be mended. The main focus in terms of health throughout the course of the pandemic has been a vaccine. Commercial companies and the CDC have been working for months to find a vaccine for COVID-19. Economist Neil Shearing stated that there are various outcomes for the economy when the vaccine arrives to the general population, but to assume that a vaccine will transform the economic outlook for next year is wrong. Some of the challenges that the World Health Organization are expecting is first to find a suitable vaccine, then supply and finally the reluctance of Americans to actually use the vaccine. Throughout the course of the pandemic, there has been a constant battle between the health of the greater population and economic stability. However, as mentioned, if a vaccine is found and can be supplied, this will not automatically refresh the economy. People will still face all of the implications of a recession.

Citation: Riley, C. (2020, September 06). A vaccine won't cure the global economy. Retrieved September 07, 2020, from https://www.cnn.com/2020/09/06/investing/stocks-week-ahead/index.html

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a covid-19 vaccine won't cure the global economy - cnn

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The US Centers for Disease Control and Prevention has asked states to be ready to distribute a coronavirus vaccine by late October. Pfizer thinks it will have enough data to ask the US Food and Drug Administration to authorize its potential vaccine next month.

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CNBC reports that the US economy faces $15 trillion hit as a result of school closures, according to the OECD. Author Vickey McKeever highlights that the total cost of missed schooling in the United States could amount to 69% of the current GDP for the typical country. Additionally, the OECD said losses to economic growth could be "proportionately higher" if schools were slow to recover. The OECD is the Organization for Economic Cooperation and Development. Because of the interruption to schooling, focused on children Kindergarten through 12th-grade, the OECD argues that the US could see global economic growth drop 1.5% for the rest of the century. Because the current K-12 generation is having to face the various educational challenges of online learning and a complete interruption, there are long term implications. In these developmental years, the priority is taken off of the education standards themselves and is focused on keeping the students enrolled. Time and resources from school teachers and administrators is currently at an all time high. As teachers are struggling with transitioning to fully online learning, students, especially younger ones are having even more difficulty. In the primary years of elementary school, it is vital that children interact with their peers and learn basic lifelong skills. However, over a video conferencing platform, this is extremely difficult. Over the course of the next century, there will be various negative implications to the economy just merely based on the standard of online education.

Citation: McKeever, V. (2020, September 08). U.S. economy faces $15 trillion hit as a result of school closures, OECD says. Retrieved September 09, 2020, from https://www.cnbc.com/2020/09/08/school-disruption-could-cost-the-us-economy-15point3-trillion-oecd.html

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The Organization for Economic Cooperation and Development has warned the interruption to children's schooling in the wake of the coronavirus pandemic could mean global economic growth is 1.5% lower on average for the rest of the century.

The intergovernmental economic organization said this projected loss of gross domestic product, which measures economic growth, would be equivalent to a total economic loss of $15.3 trillion in the U.S.

This prediction assumed U.S. students recorded a "corona-induced loss of skills" of one-tenth of a standard deviation, and on the basis that all cohorts returned to previous levels thereafter.

The OECD paper, published Tuesday and citing third-party data, estimated how students' losing out on one-third of the school year would impact the global economy in the long-run.

It was estimated this loss of time in the classroom would lead to a loss of skills, and this, in turn, would negatively impact productivity. As a result, the total cost of missed schooling could amount to 69% of the current GDP for the typical country, the OECD said.

To be sure, this prediction assumed that only the current cohort of students would be affected by the closures and that future students would resume normal schooling.

The OECD said losses to economic growth could be "proportionately higher" if schools were slow to return to "previous levels of performance."

For months, the majority of children around the world have been homeschooled, with many schools only staying open to the children of key workers. However, concerns have been raised that this period of homeschooling may have exacerbated learning gaps already exposed by the pandemic.

The OECD said that while educators have made a concerted effort to maintain learning during this period of homeschooling, children have had to rely more on their own resources to study remotely. Meanwhile, teachers have had to adapt their methods to educate students in ways in which they may not have been trained.

One suggestion in the paper to limit further setbacks in education, in the absence of a widely available vaccine, was to continue to build on the infrastructure for remote learning.

Beyond the pandemic, the OECD said that "there are evident benefits to students in expanding their learning time and opportunities beyond the school gate by being able to learn using a variety of distance learning approaches."

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organization for economic co-operation and development

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U.S. economy faces $15 trillion hit as a result of school closures, OECD says

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The Organization for Economic Cooperation and Development has warned the interruption to children's schooling in the wake of the coronavirus pandemic could mean global economic growth is 1.5% lower on average for the rest of the century.

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Amidst the economic crisis due to the COVID-19 pandemic, many major retailers have been forced to file bankruptcy and close their doors for good. This has left thousands of Americans without jobs and desperate for work. For two of America's largest malls, the landlords have agreed to save JC Penny's retail operations to save the department store from closing. Simon Property Group and Brookfield Property Partners vowed to keep the majority of JC Penny's stores open which would keep 70,000 jobs intact. JC Penny officially filed for bankruptcy in May when the company employed over 80,000 people. The mall owners took over operations in hopes of helping the retail struggles and keep consumers attracted to their properties. Although it is not the responsibility for mall owners and landlords to intervene and save retailers when they are due to close, this is beneficial to both parties. Not only are they saving jobs, but they are keeping the mall "attractive" in hopes that consumers will remain interested in brick-and-mortar stores rather than opting to shop online. The COVID-19 pandemic could result in the end of malls entirely so this action shows the desperation all retailers are currently facing.

Citation: BBC News. (2020, September 09). JC Penney: Landlords plot rescue for department store. Retrieved September 10, 2020, from https://www.bbc.com/news/world-us-canada-54095975?intlink_from_url=https://www.bbc.com/news/topics/c1038wnxypvt/us-economy

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Two of America's biggest shopping mall owners have agreed to take on JC Penney's retail operations to save the department store from closing.

Simon Property Group and Brookfield Property Partners said they would keep the majority of JC Penney's stores open, potentially saving 70,000 jobs.

JC Penney had about 850 sites and employed more than 80,000 people when it declared bankruptcy in May.

The plan marks the landlords' latest efforts to fend off retail's struggles.

Last month, Simon Property Group announced deals with other partners to buy clothing firms Brooks Brothers and Lucky Brand Jeans, which had filed for bankruptcy after mass store closures triggered by the coronavirus pandemic.

In February, Simon also teamed up with Brookfield to buy Forever 21, after the clothing chain declared bankruptcy.

Retail struggles

The woes of JC Penney, founded in 1902 in Wyoming, also predate the pandemic.

The company thrived during the 20th century, growing to become a staple of shopping malls throughout the United States. But competition from online shopping and other rivals saw sales slide in recent years.

The firm has since closed hundreds of stores and cut thousands of jobs. Last year it reported sales of $10.7bn (£8.2bn), a decrease of more than $7bn in 10 years.

The pandemic hastened that decline, forcing the temporary closure of its stores. It has since closed more than 150 locations.

The tentative deal to buy JC Penney, which requires court approval to move forward, would see Simon and Brookfield invest about $300m into the company and assume $500m in debt, a lawyer for the company said at a court hearing on Wednesday.

The firm is also seeking new financing, while other companies are expected to win ownership of roughly 160 stores, in exchange for forgiving some of the JC Penney's $5bn debt load. About 650 stores are expected to stay open.

JC Penney, which had warned previously that rescue talks were not going well, said it planned to seek court approval of a final deal in October.

"There have been twists and turns but I think we are at a place now where we have significant momentum behind us," attorney Joshua Sussberg said.

"Simon, Brookfield, the lenders and the company, the creditors committee are all committed to moving this forward quickly and saving JC Penney as we know it."

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Landlords plot rescue for US retailer JC Penney

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Two of America's biggest shopping mall owners have agreed to take on JC Penney's retail operations to save the department store from closing. Simon Property Group and Brookfield Property Partners said they would keep the majority of JC Penney's stores open, potentially saving 70,000 jobs.

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CNN Business reports that used car sales are booming in the United States and it's pushing up inflation. There are a number of reasons that used cars are in high demand in these times and this is due to the COVID-19 pandemic. People have been forced to move out of large cities because the cost of living is too high without income to support these households. Now the need for a car is present as people have to travel from places that do not offer effective public transportation. Moreover, because air travel is not recommended at the time, people are opting to travel by car to their destinations, both near and far. Prices of air travel, shelter, recreation and household furnishing rose, contributing to the increase of the consumer price index. Prices are now rising again after the large decline when the initial pandemic lockdown occurred. The nature of these events speaks to how much consumer behavior is changing. To save money, people are opting for used cars rather than new ones. There is an increase in home improvement as well that longterm, will yield a higher return on the property investment. Americans are very concerned with money due to the recession.

Citation: Tappe, A. (2020, September 11). Used car sales are booming, and that's pushing up inflation. Retrieved September 12, 2020, from https://www.cnn.com/2020/09/11/economy/inflation-used-cars/index.html

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used car sales are booming and that's pushing up inflation - cnn

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Used car sales are booming, and that's pushing up inflation

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Remember when city-dwellers weren't interested in owning cars? Those days are over. Used car sales are booming so much they pushed up consumer price inflation last month.