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COVID-19

For economic recovery, ‘virus is the boss’

A man is reflected in the window of a Seattle business that remained closed earlier this month because of the coronavirus pandemic.  (Associated Press)

The economic downturn from the COVID-19 pandemic is unlike any the country has ever seen, so it’s difficult to say whether normal rules for recessions apply, a former chairman of the President’s Council of Economic Advisers told a state Senate panel Tuesday.

Whether unemployment rates will follow the normal pattern – “up like a rocket, down like a feather” – is hard to predict, said Austan Goolsbee, a former adviser to then-President Barack Obama and now a professor of economics at Chicago University.

“The best thing you can do for the economy is to control the virus,” Goolsbee said. “The virus is the boss. It decides what will be the response of the people.”

Goolsbee was among economists providing data and advice at the first meeting of the Senate Special Committee on Economic Recovery. He said the massive collapse of the economy in March and April is unlike anything the country has seen before and isn’t caused primarily by various shut-down policies in different states.

When economists study metropolitan areas that extend across state borders where the states have different rules, businesses are suffering on both sides, even if one state has no shutdown policy and the other does.

“It’s not about the policy. It’s about people being afraid,” Goolsbee said.

Goolsbee was the chief economist for the nation’s Economic Recovery Board in the last recession. Among the lessons from that downturn were that federal assistance is vital to states to lessen the need to cut workforce and raise taxes, which make the situation worse; and preventing long-term unemployment is critical because it’s so hard to get off assistance.

He also said cutting the sales tax, which tends to generate spending, may be a better strategy than giving stimulus payments, which sometimes prompt savings and don’t immediately stimulate the economy.

The state should also look at ways to make it easier for businesses to reopen, up to a point.

“The more rules you can loosen, the better it will be,” he said. “But if you do things that ultimately reignite the virus, you can ultimately be self-defeating.”

University of Washington professor Debra Glassman, said experience from the three previous recessions suggests there will be increases in automation and productivity as the country comes out of this one.

“We’re more concerned about person-to-person contact and keeping people healthy,” Glassman said, which may lead to businesses substituting machines for people at a more rapid pace. It is already speeding up projections for increases in e-commerce and teleworking.

Betsey Stevenson, a University of Michigan economics professor, said the job loss from the pandemic is not like a normal recession.

“People were sent home and told ‘don’t do your job,’ ” she said. “We really don’t know yet how many jobs have been truly lost.”

She expects construction to have a strong recovery this summer and manufacturing to improve. The service sector has been hit harder than other sectors.

The state should continue to use a work-share program that supplements payroll when employees work less than a full week to keep more on the job, Stevenson said. It should also provide more support for child care.

Randy Fortenbery, an agricultural economist at Washington State University, said farmers face different challenges for different crops. They were just coming out of about two years of bad economic conditions from trade restrictions.

Those crops that are exported, like apples and wheat, can be affected by shifts in the exchange rates and new trade restrictions if the United States decides to retaliate in its trade war with China, he said. Apple growers also have to worry about labor shortages at harvest time and the added costs of COVID-19 protections for workers at processing facilities being passed on to them .

Grant Forsyth, economist for Avista Corp., told senators the state’s East Side has been hit just as hard as the West Side, as have the rural and urban areas on both sides of the state.

Lawmakers should also consider role of K-12 schools beyond education, Forsyth said, because for many families the schools are a primary source of food for their children.