When it comes to the economy, there’s no going back to normal after COVID-19 trauma
In his most candid moments, Ali Modarres doesn’t talk about the mounting economic fallout of the COVID-19 crisis in terms of a recession, even if you put an adjective — like “great” or “super-duper” — in front of it.
Rather, Modarres likens it to a collective trauma.
“We need to go through the stages of grief and be with this,” Modarres, the director of urban studies at University of Washington Tacoma, said last week.
“Going back to where we were at this point is too much of an expectation,” added Modarres, noting that if economic “normal” is defined as where things stood in January, that’s simply not going to happen anytime soon — if it happens at all.
Initially, that was the hope. Weather the coronavirus storm, get back to life as we knew it. But as weeks have turned into months, job losses have mounted, industries have collapsed and the true economic toll of COVID-19 has become clearer, a quick bounce back now seems like naive fantasy.
“Basically, people need to think of staging in terms of quarters, and in terms of long spans of time,” Modarres said of our economic recovery and the immense challenges ahead.
As difficult as that is to hear, I suspect it’s the truth — and a needed dose of reality.
Equally true and also important to remember right now?
Despite the nonsense you might be hearing from your uncle on Facebook or the MAGA-hat-and-assault-rifle crowd, government restrictions alone are not what’s crushing the economy.
It’s the virus, stupid ... worsened by a shamefully inept federal response from the Trump administration.
“The whole idea that it’s just a matter of coming out of our houses, that the whole thing would be fine, it’s just too much of an expectation,” said Modarres, being slightly more diplomatic.
The truth is far more complicated than the most belligerent voices would have you believe.
Even if Gov. Jay Inslee lifted every COVID-19-related closure tomorrow, we’d still be in a world of financial hurt.
As Paul Roberts of the Seattle Times recently reported, the economic devastation wrought by the coronavirus — over the span of only two months — is hard to fathom. There have been unprecedented job losses, missed mortgage payments and a nearly complete decimation of the hotel industry. Tax revenue has plummeted, while — as is too often the case — those who already had the least have borne the brunt.
At the same time, the economy is not a water spigot that can be turned on and off.
As Western Washington University economics professor Hart Hodges said, while there’s no doubt Washington’s stay-home order and other public health mandates have had “a profound effect” on state businesses, the reality is that a strong economy also requires confidence, and right now confidence is in short supply.
Put another way: In a hypothetical scenario where government restrictions disappear and we could somehow ignore the immense public health cost of doing nothing, would restaurants, movie theaters and airplanes quickly fill up? Would people immediately return to cramped cubicles in office buildings, as well as their favorite lunch spot and the grocery store they hit on the way home?
No way. Sure, some might be itching to return to cramped spaces and tight quarters, but not nearly enough to instantly revive the economy as we knew it. If they had the means to do so, people began curtailing their activities before governors across the country issued stay-home orders, and even in states where these orders have been started to be lifted, economic activity hasn’t immediately rebounded.
“If you lift (the restrictions), you don’t go back to business as usual,” Hart said.
James McCafferty works alongside Hart at Western. Together, the two economics professors are co-directors of the university’s Center for Economic and Business Research, which publishes the quarterly Puget Sound Economic Forecaster.
Initially, McCafferty and Hart said the center’s modeling suggested the likelihood of a strong “V-shaped” recovery — or, pictured on a graph, a quick dip followed by an equally quick economic bounce back.
Now, McCafferty said, the modeling suggests something more drawn out.
Visualized, the sudden drop and slow climb back will likely look more like “a sloppy U” or “a Nike swoosh,” he predicted.
“It’s just going to take longer to make that corner than what we see in a V,” McCafferty said.
There are reasons for optimism, the duo suggested — at least locally.
The immediate and lasting impact of the economic crisis is likely to vary by industry sectors and location, they said, and the Pacific Northwest is perhaps in better shape than many places to bounce back. While the federal response — especially in terms of increasing testing capacity — has been disappointing, both men credited the response from the state and the western states pact.
Still, Hart predicted there will be “a range of winners and losers,” and in all likelihood, “The Tacomas and Everetts are going to struggle more than the Seattles and Bellevues.”
“I think you’re going to see some communities with a U-shaped recovery and they’re fine. There are other people whose jobs are just going to get rolled by the debt,” Hart said.
Alluding to the pile of deliveries on his doorstep, McCafferty pointed out that the economy hasn’t been “closed,” but it has been “reduced.” At the same time, work, lifestyle and buying patterns have also changed significantly — perhaps for good.
Industries will adapt. Many businesses will close, while new ones will take their place. People’s habits and preferences will change.
All of it is happening now, they said, and even if we desperately want to, there’s no way to turn back the clock.
Hart argued that “now is the time for innovation” and to let businesses “get creative” within the constraints of what’s deemed safe, while also warning that it will important to take stock of whether the jobs the economy gains are of the “quality” of the ones lost.
“We don’t go back to normal. There will be a new normal,” McCafferty said.
This story was originally published May 13, 2020 at 5:05 AM with the headline "When it comes to the economy, there’s no going back to normal after COVID-19 trauma."
