The coronavirus economy needs help

Covid-19 is surging — but, finally, the light at the end of the tunnel is visible. Preliminary test results indicate that vaccines being developed by Pfizer Inc. and Moderna Inc. are more effective than many dared to hope. Treatment protocols have improved and new therapies are available. The mortality rate from the virus is dropping.
Medical developments aren’t the only thing to put a bounce in your step. The economy added an eye-popping 638,000 net new jobs in October, and the unemployment rate fell below 7%. The economy has so far avoided structural problems from the virus and recession. Commercial bankruptcy filings are actually below their pre-virus levels. Small businesses are surviving, with last spring’s closures
proving temporary and new-business formation surprisingly robust. Large US corporations are beating their earnings estimates.
But don’t let the good news obscure the economy’s urgent need for additional government support. The economic recovery from this spring’s recession is slowing, and the outlook for the winter is troubling. It would be a mistake to wait until President-elect Joe Biden is sworn into office in late January to give the economy the boost it needs today. Compromise between the two political parties will be difficult, but it is imperative.
The Cares Act — the $1.8-trillion economic recovery law passed in March — helped the economy recover rapidly in May and June. Its effects are wearing off, and the recovery is slowing as a result. Relative to June, monthly job gains fell by 69% in August and 87% in October. There were 2.6 times as many long-term unemployed workers in October as there were in June.
Consumers are souring, as well. The University of Michigan’s index of consumer sentiment for November fell to a three-month low. Consumer spending has retreated to its lowest level since early September, according to economists at JPMorgan Chase & Co. The March recovery law boosted incomes, and the personal savings rate shot up to 34% in April. But households are burning through their savings, and the rate had fallen by 20 percentage points in September.
The surging pandemic will suppress economic activity more this winter. So will colder weather, which will limit outdoor activities.
The economy needs support in November, December and January. Waiting until February — and allowing much damage in the intervening months — would be a grave mistake.
Yes, consumers may be more willing to tolerate the risk of getting sick in order to have more normal daily lives. So the economy might be able to grind through the winter, recovering at a slower pace, even given surging caseloads.
Even if that’s likely, another economic recovery package is needed. The balance of risk strongly favors additional support. If optimists are wrong, the economic and human costs of inaction are significant. If they are right, the harm from too much additional stimulus is minimal. And the slowing pace of the recovery is reason enough to merit additional federal aid.
Some Democrats may prefer to wait until Biden is sworn in, expecting they could get more of what they want in a package of stimulus legislation. This strategy is risky and irresponsible. Senate Republicans will be less likely to give Biden a big win in February than President Donald Trump a big win in November. And in February, with the promise of a vaccine in wide distribution looming, Senate Republicans may feel less pressure to pass another expensive bill.

—Bloomberg