Coronavirus shock will likely claim 3 million jobs by summer: Policy is needed now to curb further losses [feedly]

Coronavirus shock will likely claim 3 million jobs by summer: Policy is needed now to curb further losses
https://www.epi.org/blog/coronavirus-shock-will-likely-claim-3-million-jobs-by-summer/

At this point, a coronavirus recession is inevitable. But the policy response can determine how deep it is, how long it lasts, and how rapidly the economy bounces back from it.

If this response includes enough fiscal stimulus that is well-targeted and sustained so long as the economy remains weak, job loss will be substantially reduced relative to any scenario where policymakers drag their feet. Even with moderate fiscal stimulus, we're likely to see 3 million jobs lost by summertime. Keeping this number down and allowing any job loss to be quickly recouped after the crisis ends should spur policymakers to act.

Put simply, the federal government needs to finance a much larger part of household consumption in coming months, transfer significant fiscal aid to state governments, and ramp up direct government purchases (particularly on items helpful in fighting the epidemic).

Forecasting the number of jobs lost

Currently, the closely watched Goldman Sachs economic outlook is forecasting 0% growth for the first quarter of this year and −5% contraction (expressed as an annualized rate) for the second quarter. Given the cratering of demand already evident in data from restaurant reservations and airlines and accommodations, this may already be an overly optimistic forecast, but we'll stick with it for now. This forecast implies that the economy will shrink by roughly 1.25% from January to June (2.5% at annualized rates for half a year). Given that productivity growth (or output growth divided by hours of work) has been rising at roughly 1.25% in recent years, output growth of 0.75% is needed just to keep job growth from falling below zero in these months. (The intuition is that if output growth was zero for an entire year, and the amount of output produced in a given hour rose by 1.25%, then 1.25% fewer hours of work would be needed in the economy.)

If output growth actually contracts by 1.25% between January and June, this implies a loss in employment of roughly 2% (1.25% reduction from output contraction and 0.75% reduction from productivity growth), or more than 3 million jobs lost. If the actual number of jobs lost by the end of the summer is anywhere near this large, it will represent a pace of job loss comparable to the very worst months of the Great Recession. The unique nature of a coronavirus-driven recession means that the numbers of job losses could diverge substantially from these established, mechanical models of economic forecasts. But this is not cause for complacency—some forecasts for growth in coming quarters are even a bit worse than the Goldman Sachs projection.

One argument against this kind of mechanical calculation is that output losses are often substantially greater than job losses in recessions. In typical recessions, the first wave of job losses tends to include substantial losses in manufacturing jobs. However, a coronavirus recession is much more laser-targeted at low-wage, low-productivity, and low-hours jobs in service industries. This should increase job loss relative to output loss. Given that workers in these sectors are likely to have very little savings to tide them over the economy's downturn, the ripple effect from the first round of job losses are likely to be far greater.

A big and fast fiscal stimulus is needed to stem job losses and boost recovery

Policy will play a key role in determining the ultimate number of Americans who lose their jobs due to this outbreak. Goldman forecasts a return to growth in the 3rd quarter, but this forecast is largely driven by their assumption that a fiscal stimulus of 1-2% of total gross domestic product (GDP) appears—between $200 and $400 billion. Without at least as much fiscal stimulus as this, output and job losses will be worse. Further, if businesses expect fiscal stimulus to be quick and effective, they may be more willing to "hoard labor" during the downturn—cutting work hours back or even putting workers on temporary rather than permanent layoffs. This labor hoarding would help cushion the shock during the recession and could boost the speed of recovery.

After hopefully passing a second round of coronavirus response early this week, Congress must get right back to work passing a macroeconomic stimulus package, one large enough and well-targeted enough to fill in the substantial hole in demand that will be left by the coronavirus economic shock.

Household consumption in coming months will crater as people engage in "social distancing," but the depth of the decline will depend in part on the fiscal response. Housing, utilities, food, health care, and other consumption possibilities unaffected by social distancing constitute well over a half of all consumption spending. And some of the decline in consumption spending necessitated by social distancing will be substituted by other types of consumption spending: People will spend less in restaurants and more on groceries in coming weeks, for example.

When households' incomes fall due to job loss during recessions, their spending on items commonly considered necessities—like food and housing—often falls in turn. So even during the period when economic activity in many sectors is being intentionally suppressed to halt the spread of the virus, there is the opportunity to provide households some income support to keep other types of consumption spending from falling.

Further, having the federal government finance consumption during the downturn will allow households to emerge from the recession with much healthier balance sheets than otherwise, and this can help ensure a more rapid bounce back of economic activity. After maximizing how much income support can be delivered through existing social insurance and safety net programs (including expansions to unemployment insurance, food stamps, and Medicaid, for example), another good idea would be sending out checks of $1,000 for every American adult and $500 for every child. The first checks could arrive roughly a month after a bill was passed and signed by the president. The checks should then continue monthly until economic conditions allow for them to start winding down.

Besides preserving households' balance sheets during the downturn, the economic response should preserve state governments' fiscal capacity as well. State governments will bear a large share of the burden for providing the public health response, and their spending is often quite pro-cyclical due to balanced budget rules—meaning that state spending often collapses just as the economy needs it to be strong. The federal government should take on all state Medicaid spending for the next year to give these governments the capacity to spend as freely as public health demands, and to keep these governments from turning into the anti-stimulus machines they have tended to in past recessions.

Additionally, there should be lots of scope for ramping up direct government spending in coming months. The federal government should significantly increase their purchase of medical equipment for use in the current (and potential future) pandemics. Federally financed field hospitals and testing clinics could greatly aid the medical response and also support aggregate demand.

After the crisis

We should reiterate again that all of this stimulus should come with conditions-based triggers. We have no real idea how quickly the economy might recover from the coronavirus shock, even with an optimal policy response. We shouldn't guess. Instead, we should make sure the economy gets the support it needs so long as spending remains weak.

Finally, once the current crisis has passed, we will need a thorough diagnosis of just why the U.S. economy and society was so fragile to this shock. The already-persuasive case that public investment and social insurance in the United States should be much stronger has been made even more convincing by how unprepared our economy and public health apparatus was for this shock.

 -- via my feedly newsfeed

Sherry Linkon: Class and the Challenge of COVID-19 [feedly]

Class and the Challenge of COVID-19
https://workingclassstudies.wordpress.com/2020/03/16/class-and-the-challenge-of-covid-19/

COVID-19, the coronavirus that is spreading across the world, is wreaking havoc on working people and their families.  Weeks after it burst onto the world scene, the end of this deadly threat is still not in sight.  Although it is clear that its death toll will not begin to approximate that of the lethal 1918-19 worldwide Spanish Influenzaepidemic, early indications are that COVID-19 could end up inflicting even more economic and political damage than that earlier pandemic.  Its impact is likely to reveal with deeper clarity than we have seen in a long time the class lines that divide our society and the true costs of decades of deepening inequality.

There is no escaping the class dimension of the COVID-19 outbreak, for working people are most likely to be affected by both the virus and efforts to contain its spread.  The way they earn their livings necessarily exposes many workers to the risk of contracting the disease.  Some—such as nurses and homecare workers—put themselves at risk on the front lines caring for those who are ill. More than one-third of the 180 workers Life Care Center of Kirkland, Washington, the Seattle-area nursing home where 13 patients died of COVID-19, appear to have contracted the virus.  Other workers—including flight attendants, teachers, and food service workers—work in highly interactive settings where the virus could easily be contracted and transmitted.  If they do contract the virus, working-class people are more likely to die from it because they disproportionately experience one of the underlying medical conditions that makes COVID-19 much deadlier than the flu: heart disease, diabetes, and lung disease.   Moreover, if they feel ill, U.S. workers are more likely to delay seeing a doctor either because they lack health insurance or have high co-pays that discourage them from getting treatment.

Efforts to contain the spread of COVID-19 also have a class dimension.  As the Chinese and Italians found, workplaces provide natural nodes of virus transmission.  In order to restrain the spread of COVID-19, the Chinese government adopted strict quarantine measures that prevented nearly 300 million migrant workers from returning to their jobs after Chinese New Year celebrations, shuttering that nation's manufacturing economy for three weeks.  Italy did the same.  Fiat-Chrysler closed its Italian plants as the virus spread.  Manufacturing and service workers worldwide cannot "telework" as many white collar or professional workers worldwide are now beginning to do.  Hourly workers are far more likely to lose income than salaried workers during the coming weeks of "social distancing."  The relief bill enacted by the House on March 14 guarantees sick leave to only 20 percent of American workers according to the New York Times.  Those still vulnerable include independent contractors or gig workers.  As San Francisco Uber and Lyft driver Steve Gregg explains, he is "not in a position" to stop driving despite suffering mild panic attacks over his fear of infection.  He must work to support his family.  Too many workers like Gregg are still in the position where they must decide between personal financial ruin and accelerating the spread of a deadly pandemic.

In their classic 1929 study Middletown, Helen and Robert Lynd observed that the class lines separating working-class from middle-class neighborhoods in 1920s Muncie, Indiana, were most visible before dawn: working-class homes were first to switch on their lights as their occupants rose to face the workday ahead, which started earlier than the 9 to 5 days of the "business class."  In the weeks ahead, the class lines that divide today's America might become most visible around who must still venture out to work and who can work from the safety of home.

Yet crises can also be opportunities.  For forty years, Americans have been subjected to the drumbeat of libertarian market fundamentalism, the endlessly repeated allegation that government action could only worsen problems.  "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help," Ronald Reagan famously joked in 1986.  Who's laughing at that line now?

Crises like the current one have a way of exposing the bad faith of unclad emperors and their minions.  If the impacts of just wars, depressions, and epidemics tend to be differentiated along class lines, they also give the lie to ideologies rooted in atavistic individualism.  While they demand expertise and intelligent leadership, crises of this kind cannot be resolved by "dear leaders" who issue dictates.  Both their courses and their consequences transcend the individual; they demand mass mobilization and collective action on behalf of the common good.

Although we have not chosen this moment, it is within our power to decide how to meet it.  We could deepen divisions and set off on the fool's errand of building a "Fortress America," as our wall-obsessed president urges by cynically labeling the contagion a "foreign virus."  Or we could use it as an opportunity to build community, forge solidarity, revive internationalism, and renovate the crumbling edifice of democracy.

Working-class culture and workers' movements have long carried within their DNA the antidote to what now threatens us.  The COVID-19 pandemic reminds us of the timeless truth of the principle once popularized by the Noble and Holy Order of the Knights of Labor, the largest workers' organization in nineteenth-century America: An injury to one must be the concern of all.  If we embrace that time-honored ideal, not only can we reduce the potential lethality of COVID-19, we can begin to build a world more resistant to future plagues.

Joseph A. McCartin

Joseph A. McCartin is Executive Director of the Kalmanovitz Initiative for Labor & the Working Poor at Georgetown University

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Krugman: Step Aside for Powell and Pelosi [feedly]

Step Aside for Powell and Pelosi

Paul Krugman

https://www.nytimes.com/2020/03/16/opinion/pelosi-powell-coronavirus.html
[text only]
America's catastrophically inadequate response to the coronavirus can be attributed largely to bad short-term decisions by one man. And I do mean short-term: At every stage, Donald Trump minimized the threat and blocked helpful action because he wanted to look good for the next news cycle or two, ignoring and intimidating anyone who tried to give him good advice.

But here's the thing: Even if he weren't so irresponsibly self-centered, he has denuded the government of people who could be giving good advice in the first place.

Trump disbanded the National Security Council's pandemic response team in 2018, although he now, with his characteristic refusal to accept responsibility for anything, says that he knew nothing about it. And he has in general staffed his administration with obsequious toadies who never tell him anything he doesn't want to hear.

What's now becoming clear is that when it comes to dealing with the economic fallout from Covid-19, the situation may be even worse. There are still some competent professionals holding senior positions at federal health agencies, who could give Trump good advice if he were willing to listen. But serious economic thinking has effectively been banned from this administration, if not the whole Republican Party. As far as I can tell, the Trump team is utterly incapable of formulating a coherent response to the gathering economic crisis.


As a result, there are only two potential loci of intelligent economic policymaking left in Washington. One is the Federal Reserve; the other is the congressional Democratic leadership. At this point, in other words, it's pretty much up to Jay Powell, the Fed chairman, and Nancy Pelosi, speaker of the House; the question is whether Trump and Senate Republicans will let them save the economy.

Powell, of course, slashed interest rates and announced a large asset-buying program on Sunday. He was right to do so. But it's painfully obvious that these moves won't be sufficient, indeed will probably do little to stop the economy's tailspin. Remember, in 2007-8 the Fed cut rates five times as much as it did Sunday, and it still wasn't able to prevent the worst slump since the Great Depression.

In fact, Powell himself basically acknowledged as much, declaring that he and his colleagues "don't have the tools" to reach those most in need of help, and that "fiscal responses are critical."

Fiscal responses, of course, have to come from Congress. True, in another time, under another president, the White House would have played a crucial role in shaping crisis legislation. But last week, as the House drafted and then passed an economic relief bill — one that was helpful, if still clearly inadequate — it was almost entirely a Democratic effort. Democratic staff members put together the key elements of the bill — paid sick leave for many (though not enough) workers, enhanced unemployment benefits, increased federal contributions for Medicaid and more.



True, Steve Mnuchin, the Treasury secretary, negotiated with Pelosi, basically to make the bill a bit worse. But Democrats set the shape of the bill, even as Trump was proposing the grandiose notion of a payroll tax holiday, which has been panned even by conservative economists.

As Greg Mankiw, chairman of the Council of Economic Advisers under George W. Bush, wrote, "a payroll tax cut makes little sense in this circumstance, because it does nothing for those who can't work. … President Trump should shut-the-hell-up."

And while the White House was basically out of the loop, Republican senators have been actively obstructionist, offering no serious proposals of their own but holding up a vote on the House bill, even though that bill passed with overwhelming bipartisan support.

Why are Republicans useless at best in the face of an economic crisis? As I've pointed out before, there are many competent center-right economists, but the G.O.P. — not just Trump, but the whole party — doesn't want their advice. It prefers hacks and propagandists, the people Mankiw famously called "charlatans and cranks," whose only idea is tax cuts. The party truly has nobody left who is capable of putting together a plausible economic rescue package.

The Senate probably will eventually pass Pelosi's bill. But with all signs pointing to a steep economic dive, we need a much bigger stimulus package — perhaps along the lines being developed by Chuck Schumer, the Senate minority leader — as soon as possible. This package shouldn't include tax cuts; it should focus overwhelmingly on cash grants, perhaps a basic grant to every legal resident plus additional grants to those in special need.

And since there's nobody left in the G.O.P. who can put together a coherent stimulus plan, Democrats will have to do the job, perhaps with help from the Federal Reserve intervention to stabilize highly stressed financial markets.

I admit to being somewhat worried that Democrats won't go big enough. But my bigger worry is that Republicans will undermine their efforts. It's now up to Powell and Pelosi to rescue the economy, and Trump and company need to get out of their way.




 -- via my feedly newsfeed

Dan Little: The assault on democracy by the right [feedly]

The assault on democracy by the right
http://understandingsociety.blogspot.com/2020/03/the-assault-on-democracy-by-right.html

A democracy depends crucially upon a core set of normative commitments that are accepted on all sides -- political parties, citizens, government officials, judges, legislators. Central among these is the idea of the political equality of all citizens and the crucial importance of maintaining equality in the availability of access to formal political involvement in democratic processes. In particular, the right to vote must be inviolate for every citizen, without regard to region, religion, gender, race, national origin, or any other criterion. John Rawls encapsulates these commitments within his conception of the political values of a just society in Political Liberalism.

The third feature of a political conception of justice is that its content is expressed in terms of certain fundamental ideas seen as implicit in the public political culture of a democratic society. This public culture comprises the political institutions of a constitutional regime and the public traditions of their interpretation (including those of the judiciary), as well as historic texts and documents that are common knowledge. (13) … A sense of justice is the capacity to understand, to apply, and to act from the public conception of justice which characterizes the fair terms of social cooperation. Given the nature of the political conception as specifying a public basis of justification, a sense of justice also expresses a willingness, if not the desire, to act in relation to others on terms that they also can publicly endorse. (18)

The Voting Rights Act in 1965 was an important step in the development of racial equality in the United States for a number of reasons; but most important was the clear statement it made guaranteeing voting rights to African-American citizens, and the judicial remedies it established for addressing efforts made in various states or localities to limit or block the exercise of those rights. The act prohibited literacy tests for voting rights and other practices that inhibited or prevented voter registration and voter participation in elections.

However, the Supreme Court decision in 2013 (Shelby County v Holder) eliminated the fundamental force of the 1965 act by removing the foundation of the requirement of pre-clearance of changes in voting procedures in certain states and jurisdictions. This action appears to have had the effect of allowing states to take steps that reduce participation in elections by under-served minorities (link).

Also important is the idea that the formal decisions within a democracy should depend upon citizens' preferences, not the expenditure of money in favor of or against a given candidate or act of legislation. The Supreme Court's decision in 2010 in the case of Citizens United v Federal Election Commission found the 2002 Bipartisan Campaign Reform Act to be unconstitutional because it restricted the freedom of speech of legal persons (corporations and unions). This ruling gave essentially unlimited rights to corporations to provide financial support to candidate and legislative initiatives; this decision in one stroke diminished the political voice of ordinary voters to a vanishing level. Big money in politics became the decisive factor in determining the outcomes of political disagreements within our democracy. (Here is a summary from the Washington Post on the effects of Citizens United on campaign spending; link.)

The 2014 book by Doug McAdam and Karina Kloos, Deeply Divided: Racial Politics and Social Movements in Postwar America, is profoundly alarming for a number of reasons. They make clear the pivotal role that the politics of race have played in American electoral politics since the Nixon presidency. Most recently, the Tea Party social movement appears to be substantially motivated by racism.

The question is: where did this upsurge in "old-fashioned racism" come from? Based on the best survey data on support for the Tea Party, it seems reasonable to credit the movement for at least some of the infusion of more extreme racial views and actions into American politics. We begin by considering the racial attitudes of Tea Party supporters and what that suggests about the animating racial politics of the movement wing of the Republican Party. In this, we rely on two sources of data: the multi-state surveys of support for the Tea Party conducted by Parker and Barreto in 2010 and 2011 and Abramowitz's analysis of the October 2010 wave of the American National Election Studies. (KL 5008)

Based on this survey data, they conclude:

Support for the Tea Party is thus decidedly not the same thing as conventional conservatism or traditional partisan identification with the Republican Party. Above all else, it is race and racism that runs through and links all three variables discussed here. Whatever else is motivating supporters, racial resentment must be seen as central to the Tea Party and, by extension, to the GOP as well in view of the movement's significant influence within the party. (KL 5053)

Most alarming is the evidence McAdam and Kloos offer of a deliberate, widespread effort to suppress the voting rights of specific groups. Voter suppression occurs through restrictions on the voting process itself; and more systemically, it occurs through the ever-more-impactful ability of state legislators to engage in data-supported strategies of gerrymandering. And they connect the dots from these attitudes about race to political strategies by elected officials reflecting this movement:

Nor is the imprint of race and racism on today's GOP only a matter of attitudes. It was also reflected in the party's transparent efforts to disenfranchise poor and minority voters in the run-up to the 2012 election. It may well be that the country has never seen a more coordinated national effort to constrain the voting rights of particular groups than we saw in 2012. Throughout the country, Republican legislators and other officials sought to enact new laws or modify established voting procedures which, in virtually all instances, would have made it harder—in some cases, much harder—for poor and minority voters to exercise the franchise. (KL 5053)

Through gerrymandering the votes of a large percentage of the electorate are functionally meaningless; they live in districts that have been designed as "safe districts" in which the candidates of one party (most commonly the Republican Party, though there are certainly examples of Democratic gerrymandering as well) are all but certain to win election. Consider these completely deranged districts from Illinois, Georgia, Louisiana, and North Carolina:

And nation-wide, the power of state legislatures to create gerrymandered districts has led to a lopsided political map, where only a few districts are genuinely competitive:

So the preferences of a given block of voters among candidates in a Republican safe district have zero likelihood of bringing about the election of the competing candidate. McAdam and Kloos are very explicit about the threat to democracy these efforts and the deliberateness with which the Republican Party has carried out these strategies over the past several decades. They are explicit as well in documenting the goal of these efforts: to suppress votes by racial groups who have traditionally supported Democratic candidates for office.

The efforts at voter suppression documented by McAdam and Kloos have continued unabated, even accelerated, since the 2014 publication of their book.

The hard question raised by Deeply Divided is not answered in the book, because it is very hard to answer at all: how will the public manage to claim back its rights of equality and equal participation? How will democracy be restored as the operative principle of our country?  

 -- via my feedly newsfeed

Bernie Sanders: Coronavirus highlights the flaws in our health care and economic systems Opinion by Bernie Sanders

Bernie Sanders: Coronavirus highlights the flaws in our health care and economic systems

via CNN: https://www.cnn.com/2020/03/15/opinions/bernie-sanders-opinion-coronavirus-health-care-economic-system-flaws/index.html

Opinion by Bernie Sanders

text only

Our country is facing a medical and economic crisis the likes of which we've not seen in generations. And our response must meet the enormous scale of the pandemic.


It is at this moment that we must remember that we are all in this together. If our neighbor or co-worker gets sick, we have the potential to get sick. If our neighbors lose their jobs, then our local economies suffer, and we may lose our jobs. If doctors and nurses do not have the equipment and staffing capacity they need now, people we know and love may die.
Now is the time for solidarity, and robust action.

In the short term, we must respond with unprecedented measures to make sure we protect all people regardless of their income.
First and foremost, that means our response must be guided by the decisions of doctors, scientists, and researchers — not politicians.

At their direction, we must immediately increase the availability of coronavirus test kits and accelerate the processing of those tests. We must build out more intensive care units and obtain additional ventilators, while doing whatever we can to support and protect medical personnel. And we must significantly improve our communication and collaboration with other countries to ensure that we are learning everything that we can about the novel coronavirus.
But as we struggle with this crisis, we must remember how we arrived at this moment of peril, and then we must take long-term steps to make sure we are far better prepared for similar emergencies in the future.

When it comes to health care, we must finally do what every other major country does and guarantee health care to all our people as a human right, not a privilege.
Even before this public health crisis, many Americans were already asking: How is it possible that we spend twice as much per capita as the people of Canada and other major countries, while 87 million of us are uninsured or underinsured. Today, the pandemic puts an even brighter spotlight on the shortcomings of the current corporate-run system.
In this current system, people who are sick or experiencing symptoms of the coronavirus may not go to a doctor because they simply cannot afford it. And when somebody is not treated for the virus, that means the infection can spread to many others, putting whole communities at risk.
So, it is not just a question that in normal times — tragically, unbelievably — 13% of Americans, or about 34 million people, say a friend or family member recently passed away after being unable to afford treatment for a condition, according to a poll from Gallup and West Health. Now, during the coronavirus outbreak, the lack of health care threatens all of us, showing that we are only as safe as the least insured person in America.
This gets to a fundamental point that is so often lost in our democratic debate: No matter how politically divided we are, we are all in this together. As the Rev. Dr. Martin Luther King Jr. put it, "We are all caught in an inescapable network of mutuality, tied into a single garment of destiny — whatever affects one directly, affects all indirectly."

It is the same principle when it comes to paid family and medical leave.
Today, there are potentially thousands of workers who may be ill and should be staying home but continue to go to work to earn the wages they need to afford necessities like food and housing. Many of these workers are in the restaurant, transportation, tourism and retail industries, and may unknowingly spread the virus in their interactions with the public.
People should not be going to work when they are sick — it is unfair to them and it is unfair to the people they are in contact with. We must join every other major country in the world and guarantee paid family and medical leave to all workers.
Finally, from a national security perspective, it is incomprehensible that we are dependent on China and other countries for masks, prescription drugs, surgical gloves, and medical equipment like ventilators.
As a result of globalization and our disastrous trade policies — which I have opposed — we have been outsourcing millions of jobs and factories overseas that have gutted our economy. Now we are seeing another tragic and devastating result of those policies, as we find ourselves dependent on other countries to provide the most essential things that we need to combat a pandemic and protect American lives.
Trade is a good thing, but it must protect American workers and protect our national security so that we can produce what we need in the event of a national crisis. That means we must enact fair trade policies that bring production and manufacturing back to the United States, so that we are never in this vulnerable position again.

The days ahead will be difficult and challenging. As we take urgent short-term measures to address the immediate emergency, we must put in place these far-reaching policies to fundamentally transform our country for the better.
That is what our presidential campaign has been all about — and that is what our whole country must be about in the months ahead.--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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Coronavirus Cost to Businesses and Workers: ‘It Has All Gone to Hell’ [feedly]

an anecdotal, but potent survey of the speed of expanding economic damage.

Coronavirus Cost to Businesses and Workers: 'It Has All Gone to Hell'
https://www.nytimes.com/2020/03/15/business/economy/coronavirus-economy-impact.html

By Ben Casselman, Patricia Cohen, Stacy Cowley, Conor Dougherty, Nicholas Kulish, David McCabe and Karen Weise

March 15, 2020,


A week ago, Mark Canlis's restaurant in Seattle was offering a $135 tasting menu to a bustling dining room every night. Eileen Hornor's inn on the Maine coast was booking rooms for the busy spring graduation season. And Kalena Masching, a real estate agent in California, was fielding multiple offers on a $1.2 million home.

Then the coronavirus outbreak changed everything.

Today, Mr. Canlis's restaurant is preparing to become a drive-through operation serving burgers. Ms. Hornor is bleeding cash as she refunds deposits for scores of canceled reservations. And Ms. Masching is scrambling to save her sale after one offer after another fell through.

"Last week, I would have told you nothing had changed," she said. "This week, it has all gone to hell."

For weeks, forecasters have warned of the coronavirus's potential to disrupt the American economy. But there was little hard evidence beyond delayed shipments of goods from China and stomach-churning volatility in financial markets.


Now the effects are showing up in downtown nightspots and suburban shopping centers from coast to coast.



Not since the attacks of Sept. 11, 2001, has a crisis enveloped so much of the economy so quickly. Broadway is dark. The college basketball tournaments are canceled and professional sports are on indefinite hold. Conferences, concerts and St. Patrick's Day parades have been called off or postponed. Even Disneyland — which stayed open through a recession a decade ago that wiped out millions of American jobs and trillions of dollars in wealth — is shuttered.

"This hits the heart of the economy, and it hits the economy on all sides," said Diane Swonk, chief economist at Grant Thornton. "It's not just that we're slowing down things. We're actually hitting the pause button, and there is no precedent, there is no mold for that."


The effects are being felt even in places that the outbreak itself has not yet reached. Maine had not had a single diagnosed case of the virus when Ms. Hornor learned Wednesday that Bowdoin College, which accounts for 80 percent of her business, was calling off in-person classes and sending students home. Yet by midday the next day, she had lost 84 bookings, with more cancellations all but certain. At a somber staff meeting on Thursday, she told her 10 employees that she would try to avoid layoffs but that cuts in hours were inevitable.



"I have people who rely on me to be able to pay their rent," she said. "Not only do I have no money coming in, I'm kind of hemorrhaging cash in terms of refunds for everyone."

Get an informed guide to the global outbreak with our daily coronavirus newsletter.

Now that the outbreak is hitting the consumers, the damage is all but certain to spread. JPMorgan Chase said Thursday that it expected the U.S. economy to contract in the first two quarters of the year, which would meet a common definition of a recession. A survey of prominent academic economists, also released Thursday, found that a majority thought the outbreak was likely to cause a "major recession."

For caterers, function halls and others whose business depends on large groups of people gathering together, business dried up nearly overnight.

"It started Tuesday," said Elizabeth Perez, the co-owner and marketing director for the Pavilion Grille in Boca Raton, Fla. "They were canceling Thursday night with a dinner for 47 people, and that was the first one." Then an Ultimate Chefs' dinner for 120 scheduled for March 22 was postponed. A bar mitzvah for 150 on May 30 canceled. "That's at least $10,000," Ms. Perez said. She normally employs 20 people at an event to serve food and bus tables. Since they are hourly workers, if there is no event, there is no pay.

It isn't just the outbreak itself that is causing damage. The turmoil it has caused in the financial markets is also starting to spill over into the real economy.

Image
Kong's Tavern in Oklahoma City on what would normally be a busy Friday afternoon. With no customers, Chris James, a cook, watched as President Trump spoke on television about the coronavirus outbreak.Credit...Nick Oxford for The New York Times



Last weekend, Ms. Masching, a broker with Redfin in Silicon Valley, got three offers on a $1.2 million home she had listed in Mountain View. But by Monday, two people had rescinded their offers and the third tried to back out, citing stock market losses, after her client had accepted. At the same time, she said, prospective buyers are deciding to hold back offers on the belief that the carnage could eventually lead to lower home prices.

"Most of our clients are using stock for their down payment, and they don't have the purchasing power they did even two weeks ago," she said.

In much of the country, offices remain open, restaurants remain full and day-to-day life remains relatively normal, albeit with fewer handshakes and more hand washing. But in places where the virus is already widespread, the downturn is well underway.

In Seattle, the place hit hardest so far by the outbreak in the United States, the normally bustling South Lake Union neighborhood has been eerily quiet since Amazon and other tech companies with headquarters in the area told their employees to work from home. That has been a disaster for Tom Douglas, a local chef with a dozen restaurants. Business is down 90 percent from usual.

On Wednesday, Mr. Douglas told his staff that dinner service on Sunday would be the last for two or three months. He was shuttering his restaurants and laying off almost all of the roughly 800 employees. He planned to apply for unemployment himself and research federal disaster or small business loans.

"This is a serious natural disaster — I don't think a lot of people are thinking about it that way just because there's no winds and there's no floods," he said. "But this is a real natural disaster that's affecting people at the most basic level."



The pullback from public life is sending shock waves beyond the hospitality industry. When restaurants close their doors, they no longer need tablecloths delivered by linen services or beer from local brewers. When people stop flying, they no longer need taxis to the airport or $5 bottles of water from the airport newsstand.

Baden Sports, a sporting-goods manufacturer in the Seattle suburb of Renton, provides basketballs and baseballs for youth leagues and college tournaments, many of which are now being canceled. Jake Licht, who runs the company, has imposed a hiring freeze and is drawing up a budget in preparation for a recession.

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The Showbox in downtown Seattle has canceled or postponed every show until April. Credit...Chona Kasinger for The New York Times

"This is moving so fast," Mr. Licht said. "We had meetings and planning sessions three days ago that have already been invalidated. This is an hour-by-hour management challenge."

The speed of the crisis has outpaced economists' ability to track it. As the stock market gyrated in recent days, economic data — most of it from February, before the outbreak was widespread in the United States — continued to look rosy. Even indicators that usually serve as early-warning systems have yet to catch up: New claims for unemployment insurance actually fell last week and remain near a multidecade low.

Still, there are early signs of a crisis that is still gaining steam. Measures of consumer sentiment fell sharply in early March, and indexes of business conditions have cratered. Airlines, ports, hotels and other directly affected industries have already announced layoffs or employee furloughs. Postings for restaurant jobs were down 26 percent last week compared with the same week a year ago, according to data from the job marketplace ZipRecruiter. Job listings in catering were down 39 percent and those in aviation down 44 percent.

"The behavior changes that could set off an economic cascade that will eventually be seen in the labor market are really being put into motion now," said Julia Pollak, a labor economist at ZipRecruiter.


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The empty Amazon campus in Seattle's South Lake Union neighborhood.Credit...Chona Kasinger for The New York Times

The workers who are feeling the effects of the pullback first are the ones least able to afford it: low-wage, hourly employees, many of whom aren't paid if they miss work. Only one-third of leisure and hospitality workers have access to any paid time off, according to data from the Bureau of Labor Statistics.

Wallace McLeod has worked at TapWerks Ale House in Oklahoma City's Bricktown district for five years, but he had never seen business as slow at the bar as it was on Thursday night. With 212 taps split between two stories, the pub would have been rocking with patrons heading to the Cher concert at the Chesapeake Energy Arena a few blocks away. "I wouldn't be able to talk to you right now if the concert were going on," he said in an interview.

Instead, Cher's event was postponed, the bar was largely empty and a night that should have brought in as much as $13,000 in sales would be lucky to reach $4,000 if the regulars toughed it out. Bartenders expecting to make over $200 for the night would be lucky to bring home $80, Mr. McLeod said — which meant they, too, would rein in their spending.

"You have less money," Mr. McLeod said, noting he would have to put off a birthday party for his daughter. "You can't do as many things as you're used to doing."

I

The strength of the economy before the coronavirus hit may provide some protection. Companies that have spent recent years struggling to attract and retain workers may be reluctant to lay them off, especially if they expect a relatively rapid rebound.


Many businesses are doing whatever they can to hold on until then.

Canlis is one of Seattle's highest-end restaurants, with a piano player who entertains customers at the bar and a four-course tasting menu that runs $135 a person. But when the outbreak began to spread in Seattle, business started to dry up. Mr. Canlis, one of the owners, realized that his business was "one headline away" from putting 100-plus employees out of a job.

So over a three-hour meeting in an apartment overlooking the city, the managers worked out a new plan. This week, the restaurant will start selling bagel sandwiches in the morning, running a drive-through serving burgers and veggie melts for lunch and delivering dinner to the doorsteps of Seattle residents.

"Fine dining is not what Seattle needs right now," the restaurant said in an Instagram post announcing the change.

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Sick Pay Benefits: A Labor Market and Public Health Issue [feedly]

deeper economic analysis of the sick pay issue from Tim Taylor

Sick Pay Benefits: A Labor Market and Public Health Issue
http://conversableeconomist.blogspot.com/2020/03/sick-pay-benefits.html

Providing sick pay to workers is often discussed in terms of fairness or social insurance against the risk of declining income, but it also has an important public health dimension. Employers might prefer that sick workers remain at home, rather than passing on their illness to the rest of the workforce. But workers who do not have sick pay won't get paid if they don't show up.

Most high-income countries in the world have government-required provision of sick pay. Researchers at the World Policy Analysis Center at UCLA compiled data in a 2018 report "Paid Leave for Personal Illness: A Detailed Look at Approaches Across OECD Countries."  They write that of 34 OECD countries, only the US and Korea do not have a guarantee of paid leave for personal illness. The details of implementation vary across  countries, of course. For example, two of these countries make employers solely responsible for paying for sick leave, nine countries have government solely responsible, and 21 have a mixture of the two. In the mixed systems, a common pattern is that employers pay for the first few weeks of sick leave, and then government takes over after that up to some limit like three or six months. A common pattern in these countries is that sick leave is 80% of regular pay.

In the US, sick leave is much less likely in lower-paying jobs. Here's a figure showing the pattern from the Kaiser Family Foundation:


Efforts to have federal sick pay rule in the US have gone nowhere. However, starting with San Franciso in 2007, a number of state and local governments have passed such rules in the last few years. Twelve states now have such laws, and a couple of dozen more cities, including New York City, Chicago, Philadelphia, Washington DC, Seattle, and Portland.  The typical pattern for these laws is that all employees earn  one hour of paid sick leave for every 30 to 40 hours worked. Of course, the idea behind this design is that a worker can't take a job and then immediately take paid sick leave, but a worker will accumulate roughly a day of paid sick leave for every 8 weeks worked. For a detailed and updated  "Interactive Overview of Paid Sick Time Laws in the United States," see the A Better Balance website.

What are the effects of these laws? Stefan Pichler and Nicolas R. Ziebarth have written "Labor Market Effects of U.S. Sick Pay Mandates,"forthcoming in the Spring 2020 issue of the Journal of Human Resources(55:2, pp. 611–659). They look at employment and wage data over a time frame from 2001 to 2016 for nine cities and four states that have enacted sick pay rules. They create what is called a "synthetic control group," which is a set of cities and states that historically have followed the same patterns of employment and wages, but did not adopt a sick pay rule. Then, they can see whether adopting sick pay causes a change in  employment and wages compared to this control group. They find no evidence of such a change.

In a follow-up study, Johanna Catherine Maclean, Stefan Pichler, and Nicolas R. Ziebarth have published a working paper, "Mandated Sick Pay: Coverage, Utilization, and Welfare Effects" (March 2020, NBER Working Paper #26832, not freely available, but readers may have access through their institutiosn).  This study focuses on state-level sick-pay mandates, with data from 2009-2017. During this time, states are adopting sick pay mandates at different times. Thus, for these states and in comparison with other states, one can look for how patterns of sick leave coverage change when sick-pay mandates are adopted. They find:

Within the first two years following mandate adoption, the probability that an employee has access to paid sick leave increases by 18 percentage points from a base coverage rate of 66%. The increase in coverage persists for at least four years without rising further. Over all post-mandate periods covered by this paper, we find a 13 percentage point higher coverage rate attributable to state mandates. As a result of the increased access to paid sick leave, employees take more sick days ...  newly covered employees take two additional sick days per year. Employer sick leave costs also increase, but effect sizes are modest. On average, the increase amounts to 2.7 cents per hour worked ... Further, we find little evidence that sick pay mandates crowd-out non-mandated benefits such as paid vacation or holidays. Likewise, we find no evidence that employers curtail the provision of group policies such as health, dental, or disability insurance.

These studies are focused on labor market issues, and do not take public health effects into account. However, in a different working paper, Stefan Pichler, Katherine Wen,  Nicolas R. Ziebarth study 
"Positive Health Externalities of Mandating Paid Sick Leave" (February 2020).  Looking at state-level data, they find that in the first year after a state enacts sick pay, rates of doctor-certified influenza-like illness fell by about 11%.

This offered broad confirmation of results from an earlier study by Stefan Pichler and Nicolas R. Ziebarth, "The pros and cons of sick pay schemes: Testing for contagious presenteeism and noncontagious absenteeism behavior" (Journal of Public Economics, December 2017, pp. 14-33).  Looking at Google Flu data, they found that when U.S. employees gain access to paid sick leave, the general flu rate in the population decreases significantly, which suggests the possibility of less transmission of flu at work.

They also look at sick pay outcomes in Germany, a country with generous sick pay provisions. However, when Germany legislative changes allowed some flexibility to reduce sick pay from 100% of previous salary to 80%, the result was a large drop in more nebulous claims sickness claims like "back pain" but little drop for sickness claims related to infectious illnesses. This pattern suggests a plausible tradeoff: very generous sick pay can lead to workers taking time off for reasons not related to public health, but as sick pay becomes less generous, it will also lead to "contagious presenteeism" where contagious workers become more likely to show up at the job.

(In passing, I was also struck by this historical comment about Germany sick pay in the Pichler and Ziebarth 2017 paper: "Historically, paid sick leave was actually one of the first social insurance pillars worldwide; this policy was included in the first federal health insurance legislation. Under Otto van Bismarck, the Sickness Insurance Law of 1883 introduced social health insurance in Germany, which included 13 weeks of paid sick leave along with coverage for medical bills. The costs associated with paid sick leave initially made up more than half of all program costs, given the limited availability of (expensive) medical treatments in the nineteenth century ...") 

Some US companies are now discovering that sick pay may matter to their business: for example,
"Amazon announces up to 2 weeks of paid sick leave for all workers and a 'relief fund' for delivery drivers amid coronavirus outbreak."  But the kinds of sick pay laws that have been gradually spreading through certain states and cities are partial and incomplete. The novel coronovirus outbreak suggests that a national sick pay policy--probably with employers responsible for the first weeks and then government serving as a back-up--is an issue with broad public health consequences, not just an argument over whether government should require companies to provide certain benefits. Sitting here in March 2020, it would have been nice to have a national sick-pay policy in place a few years ago, as a way of reducing the spread of coronavirus and cushioning the loss of income for those who become sick. But it's not too early to start prepping for the next pandemic.  

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