Unemployment Is Soaring, But St. Louis Economists Say Don't Compare This To The Great Recession
Unemployment claims began skyrocketing in Missouri and Illinois in mid-March following orders from state and county leaders that have restricted movement and business operations, and new state data show that that trend has continued to accelerate.
Last week, about 104,000 people filed unemployment claims in Missouri and 178,000 in Illinois — a steep increase in both states from the prior week. Nationally, more than 5.8 million Americans filed for unemployment last week, the largest number on record.
Despite those dramatic jumps, economists at Washington University and the St. Louis Federal Reserve say the economy could recover swiftly after the worst of the coronavirus pandemic subsides and businesses start to reopen.
“I don’t think we can do much to limit the big collapse,” said Steven Fazzari, a Wash U economics and sociology professor who specializes in the economics of recessions. “It’s a question of: How long is it going to last, and how quickly can we come back?”
While projections for the current downturn appear more severe than the Great Recession, Fazzari said the economy could spring back to shape. That recovery might more closely resemble shorter economic recoveries that often follow natural disasters than the gradual, yearslong recoveries most common after recessions, he said.
He said that as long as the coronavirus outbreak doesn’t last longer than a few months, many individuals and businesses could recover by the end of the year.
Researchers at the Federal Reserve Bank of St. Louis have said that they, too, expect the economy to begin recovering by the end of 2020.
David Wheelock, vice president and deputy director of research, agrees that it’s hard to compare the coronavirus pandemic to other recessions, which have tended to develop and reverse slowly.
The necessary economic response to the coronavirus also is different, Wheelock said. Normally, the government “would be encouraging people to go out and buy cars and go to restaurants and get an airplane and take vacations,” he said. But in this case, “We want people to stay home and practice good social distancing.”
How well the St. Louis region is able to manage the outbreak could predict both public health outcomes and how quickly the local economy will recover, Wheelock said. Such was the case with the 1918 influenza pandemic, sometimes called the Spanish flu, he said.
One potential risk, Fazarri said, is that the upheaval of job losses, business closures and illnesses could cause people to spend less in the long term, which could lead to a longer recession.
The federal government approved a $2 trillion coronavirus relief package last week. Fazzari said if that package can prime businesses and consumers to return to pre-pandemic behaviors as soon as it’s safe, “we could start to maybe see a quarter or two of the best economic data as the economy bounces back very quickly.”
Will businesses make it?
Small business owners like Anne Childers are hoping that’s possible. She’s witnessed evidence of the spiking unemployment claims firsthand.
Childers owns Indigo Massage & Wellness and furloughed all of her 27 employees in mid-March when she closed the St. Louis-area business’ two locations. Childers said she immediately filed for unemployment on behalf of her employees.
They’re still waiting for the applications to process. In the meantime, Childers said she is applying for every grant, loan and aid relief program that she can find. She said that her shops are in a better position than many because she owns her buildings and has savings set aside. But Childers said she wants to be poised to open when the outbreak fades.
“A lot of it is just making sure that we can keep everything going — keep the heat on and the electric on, so that we’re ready to reopen and there is a place for staff to work,” Childers said.
Federal aid will be crucial to making sure that businesses like Childers’ spas outlast the pandemic, Fazzari said. And the more businesses that are prepared to reopen quickly, he said, the better off the economy will be.
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