With the two presidential candidates preparing to debate Thursday for the final time before Election Day, all eyes are on the economy. Both President Donald Trump and former Vice President Joe Biden will have one last chance to convince Americans that they would do a better job rebuilding America’s battered workforce and kick-starting business growth that their opponent would.
Despite the economic improvements gained since spring, the American labor market still faces a deficit of more than 10 million jobs, and more jobs are disappearing permanently. The most recent monthly employment report from the Bureau of Labor Statistics found that permanent job losses grew by 345,000 in September to 3.8 million, while the number of temporary layoffs has plunged.
Economists say job creation needs to be a top priority for whoever is in the White House come January, and business owners say they are desperate for clarity.
“Until the election’s over, I think we and our customers are hesitant to add to head count. I think everybody is kind of holding their breath for the next few weeks to see which way things are going to turn,” said William Burgess, owner of Power Technology Inc., an Arkansas-based manufacturer of laser devices used in military and medical equipment. “We do feel that there’s some pent-up demand due to Covid-19 and the election,” he said. “I think the business community will at least have a little bit of clarity and I think things will start to shake loose with that.”
There are several key topics experts and business owners say could make or break America’s economic trajectory in the final weeks of the year and through 2021.
“The combination of being more serious about the virus and more serious about relief and stimulus will be the biggest drivers in the short run,” said Harry Holzer, a senior fellow in economic studies at the Brookings Institution and a public policy professor at Georgetown University. “Then you get into job creation proposals not tied to the pandemic like infrastructure and climate-related employment.”
The pandemic remains the biggest unknown, and poses the biggest potential risk: Containing the spread and mitigating the public health and economic effects of Covid-19 needs to come first.
“Repeated waves lead to the risk of repeated shutdowns, but also a lot of consumer uncertainty,” said Till von Wachter, professor of economics and director of the California Policy Lab at the University of California, Los Angeles. “A national protocol of how to suppress the pandemic would certainly help give people the confidence to return” to their daily lives, including resuming activities like eating out, going to movies and taking vacations.
“The first thing they have to do is get the virus under control. That remains the biggest threat, and it doesn’t look like Trump is going to be willing to do anything,” Holzer said. “Biden has shown a lot more interest in … a federal strategy on testing and tracing. I think that’s a very big difference.”
The silver lining to what would be a huge, expensive undertaking is that this imperative also presents an opportunity for job creation. “We really need WPA-program-type stimulus,” said Jeff Strohl, director of research at the Georgetown University Center on Education and the Workforce. “We clearly have a need for health care technology infrastructure development,” he said. A program modeled after the National Guard to develop and train a national corps of hospital and health care workers, he suggested, could kill two birds with one stone.
Burgess said businesses like his would benefit from more readily available testing. “I would like to see free and open testing, and I think that’s one place where hourly employees have struggled in the past [because] it’s a financial hurdle for them to get tested,” he said. “Now the full cost is coming to bear on those who can least afford it, so I would be supportive of a widely available free testing option that anybody could take advantage of.” A lack of free, accessible testing means that workers run the risk of coming to work infected and unaware of their contagion, a circumstance that could trigger a superspreading event.
A growing number of both Beltway and Wall Street observers are operating under the assumption that if Biden wins the presidency and the Democrats retain control of the House and retake control of the Senate, a much larger stimulus package will be rolled out early in the new year.
Without this, the economic outlook is bad. Federal Reserve Chairman Jerome Powell and Fed Governor Lael Brainard, who is said to be a top contender for secretary of the Treasury should Biden, have both spoken with increasing urgency in recent weeks about the need for more fiscal stimulus. “Further targeted fiscal support will be needed alongside accommodative monetary policy to turn this K-shaped recovery into a broad-based and inclusive recovery,” Brainard told the Society of Professional Economists this week, calling for income support in industries where workers have been hardest-hit.
Help for households is critical, Holzer said. Without income support, particularly in the form of a reinstatement of expanded unemployment insurance benefits, economic momentum will stall, he predicted. “If you don’t replace the $600 bump with anything, you’ll also have a big drag because people’s consumption gets cut way back,” Holzer said.
One area of spending that usually garners bipartisan support is infrastructure investment, and both Trump and Biden have referred to the topic in the past in the context of job growth. Infrastructure by itself is no silver bullet, though. “We could have shovel-ready jobs to some degree, but the money won’t hit the ground in the first 100 days,” Strohl said. “The depth of this crisis is going to demand multi-faceted entry points.”
A new model for job creation could include positions in health care and technology, along with construction and building trades.
Even a comprehensive program improving roads, bridges, railways and utilities would leave out millions of the workers hardest-hit by the pandemic: women and minorities without college degrees working in service sector jobs like food service and retail. “The people who have been hit hardest have been women and minorities,” Holzer said. “Are they the people we’re going to train for these heavy construction jobs? I think that’s somewhat unlikely.”
“Infrastructure needs to move past our old version of shovel-ready, which is really a male-oriented approach to infrastructure, and this recession has hit more women than men. Hopefully we’ll find a balance,” Strohl said, suggesting that a new model could include jobs in health care and technology along with construction and building trades.
According to data from Glassdoor.com, the three of the five fastest-growing job sectors over the past month are related to technology. “Jobs within these industries are good to keep an eye on in a post-Covid-19 economy,” said spokesman Tyler Murphy.
Training and education
Strohl said getting Americans back to work will depend on what they did beforehand, and for how long they have been sidelined. “There are those workers who could be immediately re-employed if their company opened up again, there are people who could get back into the workforce with short-term training and there are some who are permanently dislocated,” he said. “We need to think about the 10 million unemployed and see who can immediately be re-employed and under what conditions.”
Reorienting the skill sets of potentially thousands of workers will be a tremendous undertaking. The Biden campaign has proposed providing two years of community college or equivalent training to all Americans, along with a $50 billion investment in workforce training through community college partnerships and free four-year tuition for students with family incomes below $125,000.
“We’re in the high-tech field, so I do like the idea of affordable education,” Burgess said, although he added that he didn’t support free tuition across the board for college because he was worried about the expense to taxpayers. “Typically on the production floor, we’re looking for two years of college or work experience in a technical field,” he said. Burgess said his employees have to continually keep their skills up to date. “Training is critical to our success. Even in a down year, we have to do some sort of training,” he said.
The environment and trade
Biden has consistently framed his environmental plan as being a boon for job creation. Kentucky-based HempWood manufactures building materials out of industrial hemp, and founder Greg Wilson is one entrepreneur who is optimistic about the potential for business growth.
“Green building policies would be more beneficial for us in the market,” Wilson said, as would incentives for using American-made products in building construction and retrofitting. “We need to make things in America because the American economy is based on services rather than making things. Right now it’s turned upside down.”
Ensuring America’s competitiveness in the midst of widespread economic pain is no small task, but it is necessary in an era of global supply chains. “Trade policy issues are going to potentially have an effect in the medium term,” Strohl said.
Relief from Trump’s trade wars would be a big help, business owners say. “The idea of the tariffs is not wrong and that’s because there are unfair trade practices in China … but the way it’s being applied is a disaster,” Wilson said.
HempWood had to buy production equipment from China because no U.S.-based supplier existed for the machines they needed, Wilson said. Although his firm received a tariff exemption, coronavirus-related disruption meant that the equipment arrived on American shores nine days after the exemption expired. “I’ve laid people off because of that tariff,” he said.
“An important distinction between the Republican and Democratic platforms is that Joe Biden puts a lot of weight on spending to stimulate the economy,” von Wachter said. “Republicans put more weight on hoping to grow the economy with tax cuts.”
As in 2016, Trump has campaigned on the promise of cutting taxes for businesses, but von Wachter cast doubt on the likelihood of success. “Spending stimulates the economy, whereas there’s much less evidence on tax cuts having a particularly strong effect on growth,” and by extension on job creation.
Trump has pledged to extend the individual tax cuts that expire in 2025, and Biden’s tax plan would effectively expand the child tax credit. Either could bolster demand, a key ingredient in an economy driven predominantly by consumer spending. “Any way you increase spending can increase jobs,” said Eric Toder, co-director of the Urban-Brookings Tax Policy Center.
Toder added that building a post-Covid economy gives the White House and Congress both an opportunity and a responsibility to ensure that the tax policies they implement incentivize inclusive economic gains.
“The other issue is, what’s our standard of living going to be in the future? Are we going to increase our productivity?” he said.
While the number of jobs added is important, he added, so is making sure that those jobs are stable, safe and pay a living wage. “Tax incentives can help these things if they’re designed properly,” Toder said.