Economists warn of lag time between vaccine and recovery
The U.S. economy could take several more months to benefit from the emergence of successful coronavirus vaccines, putting a renewed focus on the winter months as the country faces an unprecedented surge of COVID-19.
Preliminary results from two highly effective vaccine candidates are boosting hopes of a quicker end to the pandemic and a faster recovery from its economic damage. But while the light at the end of the tunnel may seem brighter today than it was 10 days ago, economists fear the U.S. still has daunting obstacles in its path.
Coronavirus cases and hospitalizations are shattering state records across the country. The colder temperatures are limiting the ways Americans can mitigate the risk of infection while socializing, and the upcoming holiday season is expected to drive soaring caseloads even higher.
As cases climb, unemployed workers and struggling businesses may run out of ways to stay afloat between now and widespread distribution of a vaccine. Several crucial government aid programs are also set to expire at the end of December, setting up a potential flood of foreclosures, evictions and bankruptcies.
Economists warn that if the White House and Congress are unable to bridge that gap with further aid, millions of Americans could suffer before the pandemic and economy turn around.
“If they don’t do much more, then we could be looking at a lot more businesses going under, the recovery backtracking and heading in reverse, and a bigger economic hole to dig our way out of,” said Adam Ozimek, chief economist at Upwork.
“What things look like in April depends a lot on what we do between now and then.”
After months of uncertainty, vaccine breakthroughs from Pfizer and Moderna have put a potential end to the pandemic within sight.
The drugmakers have announced that their respective experiential coronavirus candidates are more than 90 percent effective at preventing infection, according to preliminary data. While final results and full safety profiles are pending, both are being welcomed as major breakthroughs and promising signs in the fight against COVID-19.
Curbing the pandemic would allow businesses that rely on large groups, gatherings in tight spaces and travel to return to some version of normalcy. Even simply knowing that an effective vaccine is on the way can help businesses plan renovations and hiring ahead of likely reopenings next summer.
“There are several companies that would otherwise have had to close that will be able to bring investors along and get the loans they need to tide over this period,” said Julia Pollak, chief labor economist at ZipRecruiter.
“It expands our view of what’s possible,” she added.
The emergence of multiple successful vaccines could curb the length of the pandemic and usher in an era where COVID-19 could be contained and controlled. But there are significant questions about how quickly the U.S. can get to that point, even with preventive treatments.
While medical workers and high-risk groups may be vaccinated as soon as next month, it could take until April for vaccines to be broadly available to the general public. There are also significant challenges in distributing and administering the vaccine, along with convincing enough Americans to trust it.
The uncertainty surrounding how soon the U.S. can reach a sufficient level of inoculation has prompted caution from some policymakers, including Federal Reserve Chairman Jerome Powell.
“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term,” Powell said last week, referring to Pfizer’s vaccine results.
Powell added that even with the arrival of the vaccine, it will be crucial to extend and renew support for workers and businesses who may not see relief until it is widely available.
More than 20 million Americans are on some form of unemployment insurance, and millions are set to lose benefits when extended and expanded jobless aid programs passed in March expire next year. A federal eviction ban, foreclosure protections and student loan payment forbearance also expire at the start of 2021, raising pressure on lawmakers to pass another aid bill before the end of the year.
Prospects for another coronavirus bill, however, seem dim.
Democratic congressional leaders are still insisting on a massive stimulus bill similar to the $2.2 trillion CARES Act passed in March. Republican leaders have shown little interest in going above $500 billion, and President Trump has largely stepped back from talks after failing to strike a deal with Speaker Nancy Pelosi (D-Calif.) before the election.
President-elect Joe Biden has called for Congress and the White House to agree on a coronavirus aid bill before he takes office in January, conferring with Pelosi and Senate Minority Leader Charles Schumer (D-N.Y.) on the issue last week.
“The refusal of Democrats and Republicans to cooperate with one another is not due to some mysterious force beyond our control. It’s a conscious decision. It’s a choice that we make,” he said in a speech Monday. “If we can decide not to cooperate, then we can decide to cooperate.”
“We’re going into a very dark winter,” he added. “Things are going to get much tougher before they get easier.”
Even so, both parties are digging in. Democrats have cited the soaring rates of coronavirus cases and hospitalizations as proof of the need for a massive bill, while Republicans have touted the surprising decline in unemployment to 6.9 percent in October as vindication of their measured approach.
Economists acknowledge that the U.S. has rebounded from the coronavirus recession at a faster rate than expected, due in part to the record-breaking size of the CARES Act.
“The major reason that things have gone so well is because we did put partisan bickering aside and in a rare moment of effectiveness passed the biggest stimulus ever,” Pollak said.
Keeping up the momentum with another aid package will be crucial to protecting the businesses who’ve survived so far and the workers who depend on them from a grueling and dangerous winter, Ozimek added.
“We know that normalcy is not that far away,” he said.
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