Last March, when the emergence of the COVID-19 pandemic plunged the American economy into an unprecedented free fall, said Austan Goolsbee, an economist at the University of Chicago who served as chairman of the Obama White House Council of Economic Advisers, pointed out the first rule of virus economics: “Slowing down the virus is the way to fix the economy.” Donald Trump and other Republicans criticised the New York, California, and other Democratic-led States’ lockdowns, citing their punitive economic consequences. Goolsbee compared the activity of approximately 2.25 million companies across the country to see if there were any differences in lockout responses.
It wasn’t the lockdown that drove people’s economic behavior, but the spread of coronavirus. The death rate rose in places where people visited businesses more often than elsewhere, regardless of whether they were subject to a lockdown. Visitors to Bettendorf, Iowa’s beauty salons, which had no lockdown restrictions, fell by about the same percentage as those who visited Illinois beauty salons, which were subject to a statewide stay away order. Goolsbee stated that it wasn’t about the lockout. It’s about scaring people. This tells us that if the virus spreads again, it could severely impact consumer activity.
His point was confirmed by economic data from the late 2020 infection spike. The number of cases rose, so spending dropped and employers stopped hiring. In December, the number o employees fell by 3100 and 6000. However, the number of patients fell sharply in February and March 2021. Many economists believed that mass vaccination would end the link between the virus, the economy and the virus this summer. However, that prediction has yet to be confirmed. Following the rapid spread and spread of the delta variant of the virus, August saw a dramatic decline in new job openings. Other current statistics also indicate a significant slowdown. Goolsbee was relieved that White House policymakers had taken severe measures to stop the current rise in COVID when I spoke with him Friday afternoon. He said, “I believe if they don’t get this under control, it will end prematurely.” “The recovery has not stopped yet and it is not too late to get a grip on the virus. But, boy, that smelled like something bad – and something worse. “
Since the number of infections has increased in recent months due to the delta variant, people have changed their behavior again. Restaurant bookings are on the decline. Several major airlines said last week that their bookings for the fall were significantly weaker than expected. Goolsbee told me that he had just received a message from his daughter’s college that a Parents Day later that semester, which was planned in person, would be held virtually instead. “Now all of their flights, hotels and car rentals will be canceled,” he predicted. “That is, capitalized, exactly what you see in the whole economy.” On Wall Street, economists are cutting their forecasts for GDP growth in the third quarter. At the end of August, Goldman Sachs was still forecasting growth of five and a half percent; now she predicts three and a half percent. New data on retail sales and industrial production will be released this week. If they turn out to be weaker than expected, GDP forecasts could fall even further.
In announcing the new vaccine mandate and other COVID guidelines, the White House promoted them as public health measures. But Biden’s economic advisors, who failed to appear at Thursday’s announcement, have long shared Goolsbee’s belief that reviewing the virus is of paramount importance in reviving the economy. The recovery “will not be complete until public health is under control,” wrote Cecilia Rouse, Chair of the White House Economic Advisory Council, in a blog post following the publication of disappointing August job numbers.
The administration should have moved earlier. The slowdown in vaccination rates in early summer and the rapid spread of the Delta variant in India and the UK were both warning signs that the crisis was not over. Now that the government has changed course, swift implementation of its new policy will be vital. The plan calls for the occupational safety and health authorities to issue a new regulation ordering all companies with at least one hundred employees to require vaccinations or weekly tests. However, this rule has not yet been enacted and is likely to face a number of legal challenges.
Assuming the new policy goes into effect quickly and is upheld by the courts – two non-trivial assumptions – it could have a huge impact on overall vaccination rates. Up until now, many large companies, especially those that employ a large number of unskilled workers, have been reluctant to impose vaccination requirements because of fear of losing workers to competing firms that do not have any. “Nobody wants to be the first, it’s much easier when everyone works together,” says AnnElizabeth Konkel, economist at the Indeed construction site. Konkel has tracked the number of job advertisements that mention vaccine requirements. It more than doubled in August, albeit from a low base. “I expect the trend to accelerate quickly now,” she told me. “For many on the fence about employers, the fact that the federal government will require a vaccine will likely drive them over the edge.” To support this theory, the Business Roundtable, which represents CEOs of many large corporations, published a statement in support of the new proposals.
It is also conceivable that compulsory vaccination could help encourage more people to return to work and look for a job. At the beginning of the pandemic, the employment rate fell sharply and is still well below its normal level. A number of factors related to COVID also appear to play a role in keeping people out of work, including fear of contagion and the lack of adequate childcare. “Our surveys show that COVID is still a problem for job seekers; it’s still in their heads, ”Konkel agreed. Konkel said that anything that reduces public health concerns and improves the outlook for the future should also increase labor supply. This could help alleviate the problem of a labor shortage in many areas of the economy.
This is the optimistic scenario: a rising number of vaccinations will reduce the spread of the virus and restore public confidence. It could also help the economy return to a faster growth path. There are other possible scenarios. These include the possibility that breakthrough infections may have more serious economic consequences or that a resistant variant of the virus could emerge. The White House is working to limit the spread and spread of the Delta variant. However, economic recovery is already slowing. Goolsbee said, “There’s nothing more significant the government can do.”
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