I’ve been responsible for my share of corrections over the years, but never an outright retraction. Until now.
So that column six months ago, when I announced my retirement? (It was a damned fine column, if you’ll allow me). I’m retracting it and returning as The Seattle Times economics columnist. Our global emergency demands all hands, and I’m gratified to be rejoining this outstanding newspaper at the heart of the U.S. coronavirus outbreak.
Much has changed since October or even a month ago. The longest expansion in U.S. history, worries about finding workers with 50-year-lows of unemployment, even the growing anger over Big Tech’s reach — they’re gone like artifacts washed overboard in a terrible storm.
Even before this tempest hit, important warning signs were abundant. The asset and credit bubbles were fragile. In Washington state, President Donald Trump’s trade war had cut merchandise exports by 23% last year compared with 2018. Boeing was in a crisis from the 737 MAX and struggling with its Air Force tanker and space projects.
Now, the U.S. economy is likely in recession. Perhaps Treasury Secretary Steven Mnuchin was hitting the hyperbole zone when he warned that unemployment could reach 20% without a large stimulus. But maybe not. This is dark territory for any living person.
For context, the national jobless rate peaked at 10% in the Great Recession, and 10.8% in the inflation-busting downturn of 1982. The general estimation for the worst of the Depression was 25%, when data collection was less sophisticated.
Relatively primitive economic information also makes it difficult to draw parallels with the 1918-1920 global influenza pandemic, which killed at least 50 million in a world of 1.8 billion (today’s population is 7.6 billion). The Centers for Disease Control and Prevention says, chillingly, “the properties that made it so devastating are not well understood.”
Neither are the economic effects, although scholars have pieced together newspaper accounts of sharp falloff in business. Some 675,000 Americans perished, and this drove manufacturing wages higher. Another challenge in understanding this event is how it bled into the recession after the end of World War I, as wartime demand collapsed.
Fast forward to now, and the effect of shutdowns, working from home, social distancing and downstream consequences for every sector will be severe.
Virtually every part of Seattle’s highly diverse economy is being hammered, as has been reported in the encyclopedic coverage by my Seattle Times colleagues.
Some of the most vulnerable sectors in Washington: more than 259,000 worked in food service and drinking establishments as of January; 356,000 in leisure and hospitality; 399,000 in retail trade; and 88,500 in aerospace. Meanwhile, nearly 445,000 worked in health care and social services, many on the front lines of the pandemic. The state’s total civilian employment was 3.5 million.
Yes, Amazon might profit from the rush to online shopping. But that’s not guaranteed as supply chains, stressed by the trade war, start to fall apart.
Jon Scholes, president of the Downtown Seattle Association, told me that last week he was struck by how few people were in the center city. This week he noted the increasing quiet. Normally 330,000 people work in the central core, which generates 51% of the city’s business taxes.
“We were the first American downtown to feel the economic effects of coronavirus,” he told me. “It’s devastating to see it play out.”
Tourism is a major Seattle industry. Hotel occupancy fell to 40% by March 7. Scholes said he expects occupancy to be in single digits within a week. Convention cancellations so far are expected to cost $35 million. The cruise season is in doubt, with a $400 million hole if it is canceled until July. Arts organizations and nonprofits have been wounded, too.
“Action by the federal government at an unparalleled level is paramount,” he said. And he’s right. But can it go to the people and areas of most need, not those with the most pull on the other Washington’s K Street, center of powerful lobbyists?
There we face the administration’s hostility to cities and major metropolitan areas. They generate most of the country’s output. “It’s frustrating to see the federal disconnect on the importance of cities,” Scholes said.
Through the larger lens, we’re also paying for the administration’s hostility to science and expertise. Politico reports on how Obama officials briefed Trump’s team on preparing for a pandemic, a scenario much like we face. Nothing came of it. Trump dismantled the pandemic response team established by President Obama. The United States, in the past the world leader in times of crises, is shockingly behind, including on testing.
On the financial front, fear is driving the stock market on a level I’ve never seen. The stock market isn’t the “real economy” — until it is, and collapsing asset prices lead to layoffs and a contraction that affects every sector of the economy.
In 2008, the October financial panic was handled by a seasoned team — Ben Bernanke as Fed chairman, the top scholar on the central bank’s role in the Depression; Hank Paulson as Treasury secretary; and Tim Geithner at the New York Fed then as Obama’s Treasury secretary. No banksters went to prison — a shame. But a second Great Depression was averted.
The Great Recession may be mild to what might await us now.
Still, this is a time for pundits to be careful and modest. Let’s not draw sweeping conclusions about the future. No, cities aren’t going away (they survived the Black Death of the 14th century and will survive this). Panic is not our friend. Don’t go looking for a falling anvil to step under.
The economy has historically been resilient. And as Winston Churchill said, “You can always count on Americans to do the right thing — after they’ve tried everything else.”
In the meantime, consider this as a quickstep dress rehearsal for the much greater emergency: climate change.
And don’t expect economics and buckets of numbers, however accurate, to be our unfailing guide. Be kind to one another.
See you next Sunday.