From lapsing job benefits to full stadiums, June could be U.S.
recovery's pivot
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[June 07, 2021]
By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) - Fourteen months
after the pandemic triggered a national emergency, the final chapter of
the U.S. economic recovery may begin this month, with rapid changes
starting with the end of enhanced unemployment benefits in half the
states and ending in the fall's expected reopening of schools and
universities.
Along the way, Major League Baseball stadiums are slated to return to
full capacity, and the largest state economy, California, on June 15
will shed its final COVID-era restrictions and give bars, restaurants
and other businesses a green light on the road to normal.
That same day in Washington, the U.S. Federal Reserve is expected to
open debate about when and how to cut the economy loose from its
crisis-fighting monetary policy and shift to managing what is hoped to
be a long economic expansion.
The questions about just what the post-pandemic economy will look like
are myriad: How many people will return to jobs? How many businesses
will have survived or failed? How resilient will the country be when
pandemic supports are withdrawn? The answers should start to come soon.
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"The timing really is awesome," Porchlight Brewing Co. general manager
Tyson Herzog said of the just-in-time-for-summer end of California's
restrictions, which closed many restaurants for parts of last year and
kept them under strict limits during the fight against the virus.
An $800 billion small business assistance program helped many firms
survive, including Herzog's. After a year of home-delivering beer in his
1999 Dodge Caravan he plans to hire more onsite staff and expand
production amid already record sales.
Since coronavirus vaccines rolled out in December, forecasts have
pointed to record-breaking numbers this year, including the fastest
annual gross domestic product growth in nearly 40 years.
More than 60% of people 12 years and older are at least partially
vaccinated. The rate of new infections and deaths has plummeted, while
confidence, travel, and human socializing - and the commerce that
accompanies all that - have risen steadily.
Still, the pieces have not yet clicked in unison.
Companies in May added 559,000 jobs, but the total number remains 7.6
million short of early 2020. About 3.6 million more people are
unemployed, and the labor force is 3.5 million smaller.
Shortages of supplies, workers and raw materials have crimped the
recovery with businesses curtailing hours, turning away customers, or
delaying filling orders. The Fed's most recent national economic
snapshot referenced shortages 44 times, compared with 17 in January and
three a year ago.
Economists expect that to ease. The pandemic put the economy into what
some likened to an induced coma. Shaking off the stupor takes time, and
is complicated by some of the programs used to cushion the economy's
sharp drop last spring.
Stimulus payments and low interest rates, for example, fueled a boom in
home sales that spilled into home construction and lumber prices. Yet
the costs for wood and some other commodities already have begun easing:
lumber futures are down 24% from their peak, with copper and aluminum
falling around 5%. Likewise, the splurge on automobiles, appliances and
other goods will likely prove a one-time affair; even if demand remains
strong, supply will likely catch up.
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![](../images/060721pics/news_e9.jpg)
Customers at Almanac Taproom in Alameda, California are seated well
apart to abide by California’s strict coronavirus disease (COVID-19)
pandemic-era capacity limits, June 4, 2021. REUTERS/Ann Saphir
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Workers sidelined by a variety of issues, from health
concerns to lack of childcare, have been given latitude on when to
return to work through expanded unemployment benefits that pay some
more than their former jobs. That starts to wind down on June 12
when the first four states end the extra benefits launched last
spring as one plank in a financial "bridge" to the other side of the
pandemic.
In all, $5.2 trillion deployed across an array of programs helped
make the coronavirus recession unique: Personal incomes actually
rose even as unemployment hit 14.8% in April 2020.
With the money now largely spent, the programs one-by-one are being
shuttered.
By July 10 half the states will have ended the extra unemployment
benefits, and the program lapses nationwide on Sept. 4. The Payroll
Protection Program of small business loans closed May 31.
There's dispute over what role those and other programs play in
decisions to work or not. But to the degree prices, wages and other
factors have been distorted by the pandemic, the next few weeks
should wring those distortions out.
June will inaugurate a "summer-boom with demand still strong and
supply issues - on labor and capital - being resolved," said Gregory
Daco, chief U.S. economist for Oxford Economics. "There is evidence
of supply bottlenecks slowly easing...On the labor front, reduced
virus fear, reduced benefits, better childcare, will draw people
back."
And people seem primed to respond.
After a year of lockdown, public parks are again hosting crowds,
sports stadiums are filling, and restaurants are booked to the
limit.
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California had among the first cases of COVID-19, imposed some of
the stiffest restrictions, and will be among the last states to let
it all go.
Damian Fagan, owner of the Almanac Taproom in Alameda, is getting
ready. While he is adding up to six new employees to his current
12-person staff ahead of the June 15 reopening, he expects such a
rush of business he plans to limit his hours for another few weeks
"so we don't have this tsunami of changes."
"I don't know how long this party will last," he said. Eventually,
"this massive excitement period dies down," and business can get
back to normal.
(Reporting by Howard Schneider and Ann Saphir; Editing by Dan Burns
and Andrea Ricci)
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