COVID-19 and the wave of shutdowns that followed resulted in the worst recession since the Great Depression. Had the pandemic not occurred, 2020 would have been a lot like 2019, a year of peace and prosperity. Certainly, there are reasons to be pessimistic. What are some reasons to be optimistic?
A major source of optimism is that the current labor market is in much better shape than people thought it would be back in March. Forecasts then suggested that by June, the unemployment rate would top 20% with upwards of 30 million jobs lost. However, the unemployment rate unexpectedly declined from 14.4% in April to 11.1% in June. Approximately 22.2 million jobs were lost between February and April, but 7.5 million of those jobs were regained between April and July. The state of the labor market still is not good, but it is certainly far better now than people forecasted it to be five months ago.
Americans are returning to their lives more quickly than expected. Two hundred and thirteen billion vehicle miles were traveled in May, which is still 25% lower than in May 2019. However, this is compared to the 168 billion vehicle miles traveled in April, which was 40% lower than in April 2019. The Transportation Security Administration estimates that 755,555 people cleared airport security checkpoints on July 6, 2020. This is lower than the 2.7 million people who cleared checkpoints at the same time last year, but substantially more than the 94,934 people who cleared checkpoints in early April. If present trends continue, road and air travel will be largely recovered by the end of the year.
This increased mobility is leading to higher demand in the service sector, which is helping drive job gains. Hotel occupancy rates averaged 33.1% in May, compared to 24.5% in April. This is still much lower than the usual 60%-70% occupancy rate, but still represents a substantial improvement. Open Table, an online restaurant reservation service, reports that 60% of restaurants have returned to taking reservations, compared to almost no restaurants taking reservations in April. The National Restaurant Association’s Restaurant Index increased from 94.9 in April to 96.8 in May. Since the index remains under 100, the industry is still contracting, though the higher overall number indicates improvement. Of course, the stock market rebounding from a low of 18,500 in mid-March to nearly 26,500 in July is a source of optimism.
There was worry that even after the shutdowns ended, people would be too fearful to return to places such as restaurants, hair salons, hotels, airlines and other businesses, which would put a drag on the economic recovery. This concern has not materialized. If risks associated with COVID-19 can be mitigated through basic precautions, then people can continue to return to life as normal without a surge in hospitalizations or fatalities. If a second wave of shutdowns can be avoided, then there is a strong likelihood that the economy will have largely recovered by the end of 2021.
