In general, the majority of people across the United States, and globally, have been financially impacted in one aspect or another, due to the Coronavirus. Perhaps one or more members in your household were laid off from their respective employers; perhaps one member was forced to stay home and care for their children during the stay at home order; perhaps you are a business owner and your business significantly slowed down, or even worst, halted completely, as a result of the virus. In any of these cases, you are not alone.
Now that many states, and communities, are lifting their stay at home orders, either partially, or completely, allowing people to go back to work, we can start to walk the long road to recovery. But, what does that look like? How long will the rebuilding take? Will there be more stimulus economic packages available to those in need? Well, based upon the most recent report from The Congressional Budget Office, it could take almost 10 years (fourth quarter of 2029) for the U.S. economy to catch up to the previously forecasted levels, prior to the virus. Obviously, we know that the downturn in the markets was as a result of the pandemic and related shutdowns, and as such, Congress enacted stimulus programs in amounts exceeding 3 trillion dollars, to help alleviate the economic downturn. Although we will see an increase in the market after the initial lifting of the shutdown, the level will not be in comparison to where we were prior to the pandemic.
One of the major factors in why it will take potentially 10 years to fully recover from this pandemic is manufacturing. Manufacturing is one of our leading industries that is vital to our economy. But, when manufacturing halts, so does our economy. So although the shutdown is lifted, factories must still obey social distancing requirements until there is a vaccine, or another treatment becomes available. As a result, this will limit the number of workers allowed on factory floors, which will restrain the ability to manufacture goods, at the level we were producing pre-pandemic. These restrictions will continue to make it difficult to produce at a normal level, which in turn, will continue to affect our global economy.
Our economy is like a wheel which is comprised of numerous spokes, which keeps our economy moving. If one of the spokes on the wheel breaks (i.e. manufacturing), then the rest of the spokes on the wheel will be strained, or even worse, break completely. Another spoke on the wheel of our economy is employment. As stated above, manufacturing is a key industry in our economy, but due to the social distancing requirements, many factories are forced to lay-off, or terminate, much of its workforce. As a result, unemployment rates increase.
During this pandemic, the U.S. has not seen unemployment numbers this high since the Great Depression. Although some of the recent unemployment claims were as a result of the service and restaurant industry, which will hopefully start to decrease with the lifting of the shutdown; however, many of the manufacturing jobs will still be reduced for the unforeseeable future. With the CARES Act, the unemployment benefits provided an additional $600.00 a week surplus, in addition to the normal unemployment benefit paid to an individual; however, this additional surplus is set to end after July 31. In addition to the $600.00 weekly increase in unemployment benefits, the payout for unemployment benefits was also extended, extending benefits for an additional 13 weeks, through the end of the year, as compared with only receiving benefits for 26 weeks prior to the CARES Act. Currently, there is a discussion that these benefits will be extended, but that has yet to be seen and it is still unclear what that may look like if it is extended.
The concern with extending these jobless benefits is whether or not the state can sustain the continued payment of benefits, including the additional surplus, and extension of benefits. The additional surplus was funded by the Federal Government through the CARES Act, but the underlying basic benefit is paid by the state. If a state is depleting its unemployment benefits fund, the Federal Government will need to provide additional financial relief to assist states in providing these unemployment benefits. This financial assistance is not free money, but the money that will need to be paid back to the Federal Government. In most situations, an increase in state taxes is just one way that the monies are paid back over time. Hence, taxpayers will end up having to pay for the unemployment benefits if states run out of money.
Another concern with the unemployment benefits is the fact that some believe that due to the increased benefit and extension of benefits, there is no incentive to return back to work, even if their job is available. For those low-income workers, they may be receiving substantially more money while collecting unemployment benefits than from their typical paycheck as a result of the additional surplus. If an individual has no incentive to return to work, they will continue to drain the funds allotted for those who simply cannot find work. As a result, this will put further strain on an already strained program.
As we look at the many different factors that impact our economy and the potentially long road ahead of us as we rebuild and recover from this pandemic, we must not lose hope. When we look back at our difficult financial times in our history, we eventually rebuilt and recovered. We must remember that this situation is only temporary. We will move forward. We will get through this. Together, we will recover.
Written by Jackie L. Sulich
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