By John Cassidy
Kushner’s statements neatly encapsulated the Trump Administration’s economic theory of covid-19: it would be a sharp but short shock. As states, particularly some that are governed by Republicans, rushed to reopen their economies in May and June, economic activity did rebound. The Labor Department’s jobs report for June, which was released on July 2nd, showed that employers added 4.8 million jobs, and the official unemployment rate fell from 13.3 per cent to 11.1 per cent. Trump hailed this as “spectacular news.” But now it looks as though the employment survey, which was carried out in the second week of June, may well have marked an inflection point for the economy rather than a breakout.
As last month proceeded, the rate of new infections picked up in a number of states, including Arizona, California, Florida, and Texas. Americans took notice and changed their behavior. Some real-time indicators of discretionary consumer spending, including restaurant reservations and credit-card activity, took a dip. Given the threat that the virus presents in confined spaces, it could be argued that the restaurant and bar businesses are special cases. However, there is also evidence from other industries, such as retail and transportation, that the initial hit from the virus may be turning into a long-lasting one.
Last week, the clothing company Brooks Brothers filed for bankruptcy, and United Airlines warned that it may furlough nearly half of its U.S. employees in October—some thirty-six thousand people. On Thursday, the Labor Department reported that, during the previous week, another 2.3 million Americans had filed for state or federal unemployment benefits. “We are beginning to see the impact of the recession spreading to companies that were not directly impacted by the virus,” Andrew Challenger, a senior vice-president at the firm Challenger, Gray & Christmas, which monitors hiring and firing closely, told Reuters. “At the same time, companies that attempted to reopen but were only able to attract a fraction of their pre-COVID customers are closing down again.”
In an online appearance with the National Press Club on Monday, Robert Kaplan, the president of the Federal Reserve Bank of Dallas, said that the surge in infections and hospitalizations was having a “chilling effect” on the economy. Citing high-frequency data that his institution monitors, as well as conversations with businesspeople, Kaplan said, “Unfortunately, with this resurgence of disease, it is muting that rebound. It is muting that growth.” Other analysts agree. Economists at the investment bank Jefferies & Co. said on Monday that their index of economic activity “suggests the recovery is running out of steam. . . . Most components of our index are now below their mid/late June peaks.”
In his remarks, Kaplan emphasized the connection between faster economic growth and following public-safety protocols. He appealed to all Americans to wear masks and social-distance. “If we don’t do these things, it will be more likely that we have to slow the rate of reopening,” he said. In some places, that is already happening. On Monday, Gavin Newsom, the governor of California, ordered restaurants, bars, wineries, movie theatres, museums, and zoos to close their indoor operations statewide. In a number of counties where the virus is spreading the fastest, including Los Angeles, Orange, and Riverside, Newsom added additional businesses to the list, including gyms, hair salons, and nonessential offices.
Other states, including Arizona and Texas, have taken some more modest steps to roll back or slow the pace of reopening. What is lacking, and has been lacking all along, is effective national leadership which recognizes that repairing the economy and extinguishing the virus—or knocking it down to a very low level—are complementary policies rather than contradictory ones. From China to South Korea to Ireland, other governments have exhibited this type of leadership and resolve. We have a President who reportedly hasn’t attended a meeting of his coronavirus task force for more than a month, and who donned a mask in public for the first time on Saturday—nearly five months after the first U.S. case of the virus was confirmed.
On Monday, a number of media outlets reported that the Trump White House is trying to discredit Anthony Fauci—the best-known member of the task force—who has expressed concerns over reopening the economy as the number of cases surges. Appearing on NBC’s “Meet the Press” on Sunday, Admiral Brett Giroir, another member of the task force, said that Fauci “looks at it from a very narrow public-health point of view.” That may be true; Fauci doesn’t pretend to be an economist. And yet, by emphasizing the need to arrest the renewed spread of the virus, he is dispensing advice that jibes with what Kaplan and other economic policymakers, including Jerome Powell, the chairman of the Federal Reserve, have been saying. (“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” Powell told Congress a couple of weeks ago.)
Even as the United States is reporting record numbers of new cases, Trump seems unable or unwilling to accept reality. Until the start of this month, the daily death toll for the country as a whole had been falling, largely due to dramatic declines in New York, New Jersey, and other states in the Northeast, which endured lengthy lockdowns and moved cautiously to reopen. Over the past week, though, the national mortality trend line has ticked up a bit, a Washington Post graphic shows. And, on Friday, Deborah Birx, the coördinator of the White House task force, publicly acknowledged that a rise in the over-all number of deaths “is expected as the disease continues to spread in some of our large metro areas where comorbidities exist,” the Times reported.
Ultimately, this is a human tragedy. To protect the lives of vulnerable Americans, and also to protect the economy, Trump and Kushner should listen to Fauci rather than try to trash him.
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