Covid-19 has come roaring back and is likely to inflict further damage on the American economy, which will take years to recover to its robust pre-pandemic status.
And even with promising news on a successful vaccine candidate, that is unlikely to be widely distributed for many months.
US coronavirus infections have hit new record levels of more than 150,000 a day, causing authorities in many areas to impose new restrictions.
“COVID still determines the course of the economy,” economist Diane Swonk of Grant Thornton, said in an analysis.
“The current surge in cases is much more worrisome… (and) it is expected to be more disruptive to economic activity,” she said.
Authorities say an increasing number of cases have been traced back to relatively small private gatherings.
“Buy a small turkey,” Swonk urged for the coming Thanksgiving holiday, when Americans traditionally gather with extended family.
“Delay celebrations and demand our elected officials do more for those suffering through no fault of their own. Masks are disposable; people are not.”
Chicago, the nation’s third most populous city, has called on its residents to stay at home, while in New York and Minnesota, establishments selling alcohol must close at 10:00 pm.
The world’s largest economy over the summer showed promising signs of recovering from the worst recession since the Great Depression, but now risks another reversal especially in the absence of a new stimulus package from Congress.
“We are starting to hear from economists that they are thinking about lowering their GDP projections because of Covid,” said Maris Ogg of Tower Bridge Advisors.
While booming home and auto sales have been a bright spot in the economy, along with a rebound in manufacturing, consumers are worried about the upsurge in cases. One measure of consumer sentiment plunged in November for the first time since July.
Not until 2023?
The new wave of infections comes in the midst of a combative political transition: Joe Biden won the November 3 election, blocking President Donald Trump’s bid for a second term, though Trump continues to dispute the results.
Democrats retained their majority in the House of Representatives, but whether the party can wrest control of the Senate from Republicans will not be known until early January.
That uncertainty has scuppered hopes for rapid approval of a massive new aid package to support suffering families and businesses, as well as budget-constrained state and local governments.
Congress in March approved multiple spending bills to respond to the pandemic, which were credited with boosting the economy, but many of the provisions of the $2.2 trillion CARES Act have expired.
With at least 11 million US workers still unemployed, Republicans and Democrats remain divided on the structure and size of the next package.
Swonk said even a “skinny” $1 trillion stimulus could bring activity back to its pre-crisis levels by mid-2021.
But, she warned, “Employment would not reach its previous peak until late 2023. A vaccine can’t come quick enough to feed hungry families.”
Federal Reserve Vice Chair Randal Quarles said Tuesday he does not expect the economy to recover until 2022 or early 2023.
Consumers need to regain confidence in order to return to normal spending patterns, such as going to the movies, eating out or going on vacation.
In the nation’s capital Washington DC, for example, only 10 percent of workers returned to their jobs in October, according to data from the DowntownDC Business Improvement District.
The city’s daytime population fell to 47,000, from 256,000 before the pandemic.
Many observers fear the economic recovery will not follow the usual pattern, with a quick V-shaped rebound, or even a slower U-shape. Instead it could see a two-speed K-shaped recovery that leaves many people behind.
The US unemployment rate fell to 6.9 percent in October, down from the peak of 14.7 percent.
But a third of the jobless have now been out of work for more than six months.
This worries economists, because the longer people remain on the sidelines, the harder it is to find a job.
Central Bank chief Jerome Powell said in many cases it has been women who were forced out of the workforce “not by choice,” while children are not getting the education they should receive.
“We’re not going back to the same economy,” Powell said.
The new economy will be more dependent on technology, he added.
“I worry that it’s going to make it even more difficult than it was for many workers,” especially lower-income service workers who are more likely to be women and minorities, he said.