Economic experts are telling us that we are in the midst of an economic recovery, in the aftermath of the Covid-19 pandemic. That should be great news for most of us, except that it is becoming increasingly clear that this recovery is not like any other that we experienced in recent history. On paper some of the numbers point to a healthy recovery but upon further review, there are some major bumps in the road in this recovery.
A new breed of “recovery watchers” seems to have risen with the club including both optimists and pessimists. Moody’s Analytics and CNN Business are even partnering to create a proprietary Back-to-Normal Index, comprising 37 national and seven state-level indicators. The sheer number of indicators that they are watching is a mirror of the degree of the pandemic recession.
For those that believed that the government intervention, namely through the Stimulus packages, would be enough to rev up the economic engine, there is disappointment in the air. The recovery is just not happening fast enough. For example, the unemployment rate is still 2.3 percentage points higher than it was pre-pandemic and the increased government assistance may have been an encouragement to workers who would rather collect unemployment and the government benefits, which in many cases exceeds what they earned while working.
The positive watchers have much to be optimistic about. The economy grew last quarter at a vigorous 6.4% annual rate, the government tells us, and expectations are that the current quarter will be even better. The National Association of Realtors recently reported that more Americans signed contracts to buy homes in March, reflecting a strong housing market even before the summer began. But for all the positives, the recovery is not keeping pace with the predictions by experts. They had hoped to put the kibosh on Covid by reaching a rate of 70% of Americans to be vaccinated but due to continued resistance by many young people, the vaccination rate has not dramatically changed. In fact, a variant of Covid seems to be keeping the virus alive.
Getting businesses up and running again was another key component of the recovery. In New York City, for example, Mayor Bill DeBlasio had set July 1st as the date when the city “returns to normal.” Yet Manhattan offices are largely still empty as an increasing number of workers have learned to love working from home. The usually bustling Manhattan streets are still well below normal. Tourists have not yet returned, and the city is for all practical purposes still on the road to recovery but short of being into the full recovery itself.
While the US has lost more than 8 million jobs during the pandemic, the challenge these days is to get people back to work, as it was before Covid. In many respects, the “recovery” depends on the return to work by millions of employees. Opening restaurants is a positive development but without the return of people in places in Manhattan, it is hard to return to “full capacity.” Many employees have simply become extremely comfortable with the work from home model. Others are using health, religious objections, and almost every excuse in the book to keep working from home while drawing a paycheck.
In one recent case the refusal to get vaccinated led to 153 workers at Houston Methodist Hospital resigning or being fired. Earlier, the hospital reported 178 employees had been suspended for not complying with the hospital’s vaccine requirement for workers. It appears most of those employees chose to leave the hospital system rather than be fully vaccinated. What that meant is that these workers had to be replaced, an idea that the hospital did not cherish.
Getting employees back to work has also resulted in chronic shortages of such items as lumber, fuel, and food, yet another blow to a “full” recovery. Consumer goods shortages lead to higher prices, which in turn leads to inflation, another major setback for recovery. Despite these shortcomings, most experts predict a robust recovery. They argue that a decline in new infections (provided that a variant does not result in a major spike), high vaccination rates, increased consumer and business confidence, and the far-reaching effects of fiscal and monetary expansion will drive a robust recovery this year.
When there are hiccups in the recovery, as we found, they can be a major damper in the optimistic projections. They can indeed have a severe impact on the economy. One example is the effect that the shortage of workers is having on the supply chains that include such items as groceries, gasoline, appliances, and clothing. There is simply a shortage of qualified truck drivers to deliver those products.
The U.S. Bureau of Labor Statistics reported a shortfall of nearly 66,000 drivers in 2020 compared to the previous year. Some of it was brought on by COVID-induced retirements and the lack of new drivers to replace retirees. “A lot of drivers were retiring early during COVID that were originally planning to retire in the next few years,” said Brad Bell is the president of Roadmaster Driver Schools. “Additionally, schools were training less drivers due to social distancing. So suddenly the supply shrunk while demand grew.”
From all the evidence, it appears that the shortage of drivers is continuing well into 2021 and possibly into 2022. Even if companies are able to find replacement drivers, they appear far less qualified than the regulars. The upshot of it all, say business leaders, is that there are severe delays in deliveries, causing undue economic harm to retail establishments. One company that had outsourced its deliveries found that warehouse workers were increasingly absent and several, like the drivers, were opting for early retirement. The missing warehouse workers contributed to a disruption in the supply chain.
Some economists feel that in the short-term many of these hiccups will need some remedies, but they also say that it will result in many permanent changes. For example, a company that relied on long-haul deliveries may instead opt for local sources or may in some cases make arrangements to become more self-sufficient.
There seems to be a consensus that the post-Covid era will result in many structural changes in the business environment. One firm plainly says that it will return nearly 50% of its space in favor of allowing a number of employees to work from home. A measure that was designed to be a short-term stop gap move has evolved into a permanent change in the company’s work model. Technology has certainly been a major factor as more and more businesses are being conducted via Zoom and thus making working from home more acceptable. For all practical purposes, this economic recovery is not without its hiccups, but you can be sure it’s on its way. Exactly what the ETA will ultimately be remains to be seen.