While unemployment rates have shown a marked turnaround from record-high levels in April, economic signs are not pointing to a quick end to the recession triggered by the COVID-19 pandemic, according to a St. Louis Federal Reserve official.
Charles Gascon, a regional economist and senior coordinator at the Federal Reserve Bank of St. Louis, said Aug. 19 that July’s national unemployment rate of 10.2% – an improvement of 4 percentage points from April – is still above the Great Recession high of 10% reached in October 2009. The 14.7% April rate was the highest since the Great Depression, according to U.S. Bureau of Labor Statistics data.
Gascon was the guest speaker for the Springfield Area Chamber of Commerce’s annual Economic Outlook event, which was livestreamed this year for coronavirus safety precautions.
“What makes this recession very different is why people are unemployed,” he said. “It’s really these workers that are temporarily laid off that drove the unemployment rate to these record numbers.”
Job growth has been on a better recovery track locally and statewide than nationally, Gascon said. In June, Springfield’s unemployment rate was 7.2%, while Missouri came in at 7.9%. Both are well below the national average and should remain that way when state and local numbers for July are reported near the month’s end, he said.
“In a place like Missouri, where it’s manufacturing heavy, … job growth has been able to pick up a little bit stronger,” he said, pointing to Nevada and Hawaii as tourism-driven states that will continue to struggle. “While things have come back, there’s still a really long way to go to get back to some sense of a normal-level economy.”
No sector has been spared job losses, but Gascon said the retail and tourism sectors are going to take “a very long time” to recover.
Ken Homan, senior vice president and senior portfolio manager at Central Trust Co., was one of the 250 people registered to watch the chamber event. He came away concerned about the elevated jobless rate projections for the year’s end and 2021.
Data analysts at IHS Markit forecast an 11.4% national unemployment rate at year’s end and only dipping to 9.4% at the end of 2021. Missouri’s jobless rate is forecasted at 6.6% to finish 2020 and 5.3% at the end of next year.
“Not only how long it takes but how far we come depends on the shape of the recovery,” Homan said, referring to a V-shaped, quick economic bounce back or a U-shaped, gradual comeback. “The leisure industry can’t come back unless we have some better ability to meet together.”
The nation’s physical healing from the coronavirus pandemic is necessary for a full economic recovery, Gascon said. COVID-19 numbers have risen this summer in numerous states, including Missouri, which he said is slowing the economy’s recovery rate. Statewide confirmed cases exceeded 70,000, as of Aug. 20, according to the Missouri Department of Health and Senior Services. Statewide cases had risen by 7.7% Aug. 13-19.
As virus numbers have increased, consumer confidence has waned, Gascon said. Any number over 100 is net optimism, he said, noting the U.S. and Missouri levels were at 116 and 119, respectively, at the start of January, according to digital media and survey research company Morning Consult. Both numbers dropped into the 80s by mid-April and are yet to recover. As of Aug. 1, the U.S. consumer confidence level is 86 and Missouri’s is 89. The state’s level has dropped 25% since the start of the year.
“That’s concerning when we think about what the spending data is going to be in the coming months,” he said.
Job market recovery should continue in the coming months as more employees temporarily laid off return to the workforce, Gascon said. Businesses already have shown an ability to adapt during the pandemic through productivity pivots or working from home.
“The U.S. economy has a long history of innovating even during hard economic times,” Gascon said.
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