Will coronavirus set Seattle’s economy back decades?
The economy is taking a potentially massive hit from the coronavirus outbreak, and job losses are soaring. To get a sense of the local impact, Windermere Chief Economist Matthew Gardner joined Seattle’s Morning News.
So, what should we know about state unemployment figures?
“It’s following the direction of the nation, as you mentioned, and when we talk about unemployment, it’s actually initial unemployment claims. Those will come out weekly, and when we look at Washington state, obviously it jumped dramatically. Last week, it’s up to 192,000 new applications for unemployment,” Gardner said.
“From the start of this year, we were averaging somewhere between 5,000-8,000. Then the second week of March came along, and it doubled with 14,000, third week was 129,000. Companies can’t run, everyone’s gone home and a lot of people obviously were laid off or furloughed. Because of that, everyone’s filing unemployment. The federal mandate is going to increase people’s unemployment checks by another $600 per week for the next four months.”
As Seattle’s Morning News anchor Dave Ross noted, we understand that they’re going to try to replace people’s wages, at least at the lower end of the scale, and add the $600 to make them whole. But is that enough?
“Well, if you look at it, and we ran the numbers, what it basically tells me is if somebody were making anything less than $39 an hour at work, with this program they’re making more money on unemployment than they would be working.”
How long can this go on before there is permanent damage, before it sends Seattle back to the 1970s?
“This whole situation was caused not by any exogenous economic shock. It was a bug. We shut things down, actually did it rather well here in Washington state. In fact, the belief is now we’ll hit a peak on new infections in about two weeks,” Gardner said.
“Given the fact that we had a remarkably tight economy and very tight labor market up until about three weeks ago — we had unemployment knocking around the mid 2% range — a lot of businesses do believe that they will reopen,” he said. “Obviously, the federal government’s helping them out through small business loans and these kinds of things to make sure they stay above water. But they believe, as I do, that when we start recovering, when we come out from under this scenario that we’re in today, they’re going to want to hire these people back.”
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