The United States has the means not only to arrest current negative public-health and economic dynamics but also to transform them into a virtuous cycle. But this will require sustained and simultaneous efforts in four areas.
LAGUNA BEACH – As excited as we all understandably are about the arrival of the first COVID-19 vaccines, the immediate road ahead remains treacherous. The United States, in particular, could be on the verge of a horrible scenario in which ongoing slippages in each of four areas – public health, the economy, policy, and household behavior – end up making those in the other areas even worse. Over the next few weeks, they risk setting in motion a vicious cycle that, if it materializes, could shatter the lives and livelihoods of many more people, even though vaccines are in sight.
Fortunately, through individual and collective action, the US has the means not only to arrest these dynamics but also to transform them into a virtuous cycle. This will require a set of sustained efforts rather than simple repetition of one-off measures.
Notwithstanding the restrictions that one state after another is putting in place, America’s current wave of COVID-19 hospitalizations and deaths is unlikely to subside in a lasting fashion. Yet, rather than regarding these measures as necessary but insufficient, too many Americans will instead be inclined to conclude – incorrectly – that restrictions are ineffective except in their very narrow role as temporary circuit breakers.
Moreover, the US is failing to get a handle on public-health challenges at a time when the economy is already weakening. The recent string of increases in weekly jobless claims confirms that the recovery in both the labor market and the overall economy is losing steam. More granular daily indicators of economic activity (such as mobility, restaurant bookings, and search activity) further support this view.
A growing number of economists now believe that the more comprehensive monthly jobs report for December, released in early January, may show negative job creation. It could be only a matter of time until we start worrying about the threat of a US double-dip recession similar to the one that Europe may already be experiencing.
The third area of concern is the overall US policy response to the economic crisis, which remains unbalanced and inadequate. Yes, monetary policy is still in “pedal to the metal” mode, with the US Federal Reserve expected to do even more at its December 15-16 policy meeting to support economic recovery. Unfortunately, the world’s most powerful central bank is essentially pushing on a string when it comes to long-term economic well-being.
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