The Memo: Economy faces new COVID-19 dangers

Economic experts are increasingly worried about the possibility of a double-dip recession, a scenario that would make the first months of President-elect Joe Biden’s time in the White House even tougher.

Concerns are rising even as three separate COVID-19 vaccines have posted very promising results.

The vaccine news has deepened an incongruity in the economic picture.

The stock market has been propelled to new highs despite elevated unemployment, sinking consumer confidence and public health warnings of grimmer death tolls from the pandemic in the weeks ahead.

Republicans, including President Trump, have highlighted the stock market’s performance in seeking vindication for their policies.

Rep. Andy Biggs (R-Ariz.) last week tweeted a story about the Dow Jones Industrial Average closing above 30,000 points for the first time, adding, “The U.S. economy has enjoyed incredible momentum since [President Trump] took office thanks to his commitment to pro-growth politics.” Trump retweeted Biggs.

But Mark Zandi, chief economist at Moody’s Analytics, said there are already signs of the economy “throttling back” — and that he expects to see more such evidence when the latest monthly job numbers are released on Friday by the Bureau of Labor Statistics.

The unemployment rate in October was 6.9 percent. This was far below the pandemic peak of 14.7 percent in April, but it was almost twice as high as the 3.5 percent unemployment rate in February, before the pandemic hit with full force.

The centrality of the economic problems to the political picture was underlined on Tuesday as Biden introduced key members of his economic team.

Janet Yellen, Biden’s pick to lead the Treasury Department — if confirmed, she would be the first female Treasury secretary — said that “we are facing historic crises again.” Yellen also sounded a warning that “inaction will produce a self-reinforcing downturn.”

It’s a widespread concern. Congress has not yet passed a new stimulus bill related to the coronavirus. Negotiations have bogged down over the cost of such a bill, with Democrats favoring a larger package and Senate Majority Leader Mitch McConnell (R-Ky.) balking.

On Tuesday, McConnell told reporters that it was likely any coronavirus measure would come as part of a year-end omnibus spending bill that needs to find its way to the president’s desk by Dec. 11.

Earlier Tuesday, a bipartisan group of Capitol Hill lawmakers proposed a $908 billion compromise.

But passage is not guaranteed for any proposals, and there are concerns about other support measures that will soon be phased out.

A number of emergency loan programs had been set up earlier in the course of the pandemic, many of which were facilitated by the Federal Reserve and the Treasury Department. But late last month, Treasury Secretary Steven Mnuchin said the programs would come to a close at the end of this year.

The Fed, led by Jerome Powell, made clear that it would have preferred the programs to remain available.

Both Mnuchin and Powell testified before the Senate Banking Committee on Tuesday.

Mnuchin offered a degree of optimism about the economy, but Powell said the outlook was “extraordinarily uncertain.”

Despite their other differences, Powell and Mnuchin were in agreement on the desirability of further stimulus. Powell told the Senate panel that “some fiscal support now would really help move the economy along.”

The problem is that the economy cannot really be moved along while COVID-19 has such a catastrophic impact.

The pandemic has now claimed almost 270,000 lives in the United States and a total of 13.6 million people have been infected here. Rates of infections, and death rates, are climbing across the nation.

On Monday alone, more than 1,200 people died and almost 168,000 new cases were recorded, according to The New York Times.

Kavita Patel, a nonresident fellow at the Brookings Institution specializing in health care, noted that restrictions were already being tightened. She said she had some optimism in the longer term, into 2021, but for the moment was deeply concerned about the surge.

“I don’t know what Christmas looks like” in terms of the pandemic, Patel said. “No one wants to talk about a national lockdown, but we might need something close to that.”

As a practicing primary care physician, Patel’s chief concern is with the human toll being exacted by COVID-19. But she acknowledged that “the medicine is tied to the economic outlook. We will not have economic recovery until we have confidence in our medicine.”

That confidence is growing, at least, with the three vaccines that have shown such promise. Even if just one is fully approved, vaccinations for high-risk groups could begin before the end of the year.

But experts like Patel said Biden could be facing a bleak scenario when he takes office.

“We could be looking at 250,000 to 400,000 cases a day by Jan. 20,” she said, referring to Inauguration Day. “They are going to have to deal with these issues directly, and the way to deal with it is with a national plan.”

Biden has proposed such a plan but it offers no miracles, leaning instead on improvements in testing, contact tracing and the provision of proper equipment to front-line workers. Biden has also said he would press governors to mandate the wearing of masks.

The stock market rose again on Tuesday, with the broad-based S&P 500 closing at an all-time high.

But it’s a different story in the broader economy as the pandemic rages anew.

Biden faces huge challenges and any recovery will take time, experts warn.

“This is not only about avoiding recession,” Zandi said. “It’s about getting back to the economy we had before the pandemic hit anytime in the near future.”

The Memo is a reported column by Niall Stanage, primarily focused on Donald Trump’s presidency.