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Virus packed a mean punch on economy

The viral outbreak sent economies spiraling when it struck in March and hasn’t relented since.

The way people worked, dined, shopped and found leisure changed under the constraints of government-imposed stay-at-home orders meant to slow the spread of COVID-19, but with those restrictions came a hefty price — an alarming economic crisis that, forecasters predict, won’t end anytime soon even as vaccines are rolled out coast to coast.

Stimulus aid came down from the U.S. government to bolster the weakened economy and help struggling Americans and businesses, twice, and have been effective in mitigating the tremendous loss.

Yet the pandemic continues to demand its toll.

EMPLOYMENT

“Not surprisingly, it’s been overwhelmingly negative,” said Albert J. Sumell, economics professor at Youngstown State University. “It’s been the largest decline in employment in the Mahoning Valley and also in the nation over the past 40 years … .”

Joblessness soared across the U.S. and applications for unemployment benefits rose to levels not seen since the Great Depression. No corner of the nation was spared, including the Mahoning Valley, where every sector of the labor force lost jobs over the last several months, according to the U.S. Bureau of Labor Statistics.

That includes sectors traditionally insulated from recession such as government and education / health services.

Some sectors were hurt worse than others, but “it’s across the board,” Sumell said. “There has not been a single sector that has not experienced a decline in employment.”

Preliminary bureau numbers for November show that compared with last year, the mining, logging and construction sector is off 25 percent. Education / health services is down 15.7 percent; professional and businesses services, 12.6 percent; and manufacturing, 9.6 percent.

“What is most surprising about the decline in employment in the midst of a global health pandemic, (is) the health care sector that would be insulated or potentially even see an increase because there has been such an increase in demand for health care, but health care has also seen a substantial decline in employment,” Sumell said.

“The reason for that is if it is nonessential, then there has been a big decline in demand. There has been this huge spike in demand for essential services, so emergency room … and then the nonessential jobs, which is where the majority of health care jobs are and the majority of output is, they’ve seen a decline, so things like people are putting off knee surgeries or anything to avoid going to the doctor or avoid going out,” Sumell said.

Unemployment numbers have improved since the restrictions went away and the recovery has been bolstered by a fiscal stimulus that provided financial help to Americans with direct payments and expanded unemployment benefits and loans to businesses to keep employees working.

The recovery, however, has been uneven, said PNC Bank economist Bill Adams.

For example, “industries able to adapt to social distancing and the limitations on activities, like residential real estate, had a strong bounce back over the course of the last few months. For industries that just don’t work if you can’t gather people together, it has been a much, much more difficult year,” Adams said.

STIMULUS

During the initial lockdown, incomes rose, he said, as citizens received the direct payments and unemployed workers received the increased unemployment benefit.

“It’s been extremely effective at keeping cash in consumers’ pockets and limiting the number of businesses that closed in this downturn,” Adams said. “That kind of laid the groundwork for the recovery in consumer spending that we’ve seen in the last six months.”

He added: “That recovery has been constrained by, consumers may have cash in their pockets, but they are reluctant to go to restaurants or move theaters or other areas where they are concerned about the pandemic, but they do have that spending power, which has been a huge boost to the recovery and is the big reason why the unemployment rate has fallen so quickly.”

Sumell said it’s difficult to look at the stimulus as effective when the situation remains so dire, but “had the CARES Act not passed, it would have been much worse.”

The Coronavirus Aid, Relief, and Economic Security Act was a more than $2 trillion stimulus package Congress passed that gave direct assistance to people and businesses impacted the pandemic.

“In terms of overall effectiveness, when it’s judged relative not to where we were before the pandemic hit, but relative to where we would be without that CARES package, it was undoubtedly very effective in terms of alleviating the amount of hardship for those who lost their jobs through the expanded unemployment, but also decreasing the number of jobs that were lost through those PPP loans,” he said.

“It’s almost a consensus amongst economists that it was very necessary and effective in terms of mitigating the amount of losses that the overall economy suffered,” Sumell said.

RECOVERY

Next year will be better than 2020.

“By all means, I can confidently say that 2021 will be a better year in every statistical way than 2020 was because it’s unimaginable that it could not be, but that doesn’t mean by the end of 2021, we’ll be back to where we were at the end of 2019,” Sumell said.

Widespread inoculation of the COVID-19 vaccine will go a long way toward returning to normal. Until then, Adams expects slow going. Businesses have adapted — more people are ordering online and restaurants are going more carry-out — so the question is, he said, how can business bridge the gap.

“The biggest change to the outlook over the last couple of months is the news of how effective the vaccines seem to be and because of that, that has really increased the confidence that the pandemic can come under control in 2021 and by extension the businesses that were most directly hurt by it will be able to start getting back to normal,” Adams said.

Said Sumel: “With all the gloom and doom around 2020, 2021 will be a better year. Long term, for this economy, for the Mahoning Valley specifically, I do still feel very optimistic that we are on a positive trajectory because we still have three very significant economic development projects in the works that have not changed as far as their timeline or not changed as far as the expected number of jobs that will be created as a result and that is all going to start in 2021.”

Those projects are the General Motors / LG Chem joint venture Ultium Cells LLC in Lordstown, an electric vehicle battery-cell manufacturing plant that will employ upward of 1,100 people; Lordstown Motors Corp., which expects to employ thousands to produce an electric pickup truck; and the HomeGoods regional distribution center, also in Lordstown, that will employ about 1,000 people.

rselak@tribtoday.com

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