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A Conversation With ... John Rabon

Economist, Missouri State University

Posted online

Five months into the coronavirus crisis, how would you characterize consumer confidence?
Anecdotally, I am seeing more people going out. The data represents that there are some jobs that are coming back, so the unemployment rate fell a little bit for the month of July. The nation is down under 10%. For Missouri, it’s actually under 8%. Jobs are coming back, but still not to the extent or anywhere close to where they were before all this started. There is some evidence that masking ordinances have helped, not only just in terms of the virus, but with people more willing to go out. Until the virus is completely under control or there’s a vaccine or it’s gone forever, we’re never going to be back to where we were before. The virus is the economy.

Small businesses have been dealt a huge blow by the pandemic, with mandatory closure orders and reduced occupancy. How does the health of small businesses impact the overall economy?
It’s jobs. Most people are employed by smaller businesses. The Paycheck Protection Program helped. If you look at the numbers, according to the corporations based in Springfield, it saved over 30,000 jobs. The problem is, it has run out and the economy is still not back up to where it was and businesses are still in trouble. There are all these trade-offs with, if the virus comes back, do we shut down again? I don’t think we’re going to shut down again. At least not in Missouri because businesses can’t afford it. The original CARES Act passed in March helps, but we need more and it doesn’t look like we can get a whole lot more coming out of [Washington,] D.C. soon. The parties are gridlocked. President [Donald] Trump passed executive orders on (Aug. 7) that did include unemployment benefits but didn’t tell the states how they’re going do that. Trump came back and said, “I’m doing an executive order where you’re going to get $400, but the state has to chip in $100 of that $400.” States don’t know how to do it. They’re looking for guidance.

In this next round of stimulus, what should be included to most impact the economy?
The biggest thing was that $1,200 check that we got, and then there’s going to be another one in this bill apparently, but those should have been rolling. Those should have been every month because if it’s a consumer confidence issue, if you get a one-time check from the government and if you’re scared about going into a recession, what are you going to do? You’re not going to go spend that money. You’re going to save it because you might lose your job. But if you know you have checks coming in over the next three or four months, you’re more likely to go spend that money. The first check wasn’t really a stimulus check. It was a make sure you can pay your rent check. If you really want to get it going, we need to do more of that. We also need more on the unemployment benefit side. The problem with that is if it’s too high, you’re encouraging people not to go to work.

What would be the most beneficial support for businesses?
There needs to be more Paycheck Protection Program (funds) to protect workers. Depending on who you ask, they might tell you that the first round wasn’t big enough and they might say the first round was too much. The problem with all this is you have a bill coming out of Washington, D.C., and it applies to Manhattan, just as much as it applies to Springfield. That’s as hard to do. Six hundred dollars a week extra in Springfield is a lot of money; in Manhattan it’s not so much. I think a third of the people who have received unemployment benefits, if you annualized it over the whole year, they had made about $10,000 more for the whole year than they would usually.

What indicators do you track to predict economic recovery?
The big one that we always teach is the unemployment rate. But that’s tricky because in order to be counted as unemployed, you have to be looking for a job. Currently across the nation, this is the most recent data we have: In the month of June, it was three unemployed people per job. The month before that it was four and a half, so things are getting better. I’m looking at the quit rate, the more people are quitting their job, the better the economy. I’ll look at unemployment claims being filed. The highest it ever was was a week in 1982. And it was over 600,000 people. And then the second and third week of March when this all hit, the number was over 6 million.

John Rabon can be reached at jsrabon@missouristate.edu.

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