PROVIDENCE – While continued high unemployment rates suggest the labor force remains in dire straits, there’s more to the story than this single data point can capture, according to James Glassman, managing director and head economist of commercial banking for JPMorgan Chase & Co.
Glassman addressed members of the Northern Rhode Island Chamber of Commerce last week during a virtual “Lunch & Learn” event in which he offered insights on the current financial situation and potential path to recovery.
Glassman cautioned against using monthly unemployment rates – which decreased in June but remain well above historic averages – as the only marker of labor force disruption. While labor income was dramatically slashed by the pandemic, disposable income has increased significantly as a result of federal stimulus money and other support through the CARES Act, Glassman said. As a result, recovery will – and in terms of consumer spending already has – happen more quickly than a typical recession, Glassman predicted. He likened COVID-19’s impact more to a natural disaster in that regard, with a dramatic drop in activity when people are forced to stay home, but one that rebounds more quickly once the economy reopens.
“If this was a normal business cycle, I would say this could take us a good 10 years to work our way out,” Glassman said. “But if it follows the script of a natural disaster, it’s going to be a lot of chaos, but then we’re going to start to recover very quickly.
Moreover, the equity market’s response to the crisis suggests that investors remain optimistic thanks to innovations in health and technology, along with federal stimulus aid, Glassman said.
The biggest challenge for businesses in the short term will be resuming operations while abiding by social distancing guidelines. Glassman predicted a full economic recovery will not be possible until there is a vaccine that can reduce these restrictions on businesses.
Nancy Lavin is a staff writer for PBN. Contact her at Lavin@pbn.com
