The nation’s economic and political future is clouded by uncertainty, but Moody’s analyst Emily Mandel had a crystal-clear message for Vermonters who tuned in to the Lake Champlain Regional Chamber of Commerce’s annual legislative breakfast Tuesday on YouTube.
Economic progress has slowed sharply over the past two months, and that’s because the federal stimulus money that was flowing to states and individuals earlier this year has tapered off, Mandel said. Moody’s on Monday updated its October forecast to reflect the political blockage that is holding back a new stimulus package.
“It seems really unlikely we’ll get a bill passed,” said Mandel of a federal stimulus package, which is stalled in Congress. “We stripped out the assumption of new funding coming into the economy. We don’t expect a stimulus to be passed until February.”
With the national economy hovering at about 80% of its pre-pandemic strength, and unemployment nationally now at an estimated 8%, the economic crisis brought on by Covid-19 dominated the chamber’s annual event.
Hope for a new stimulus bill led the discussion. The $2 trillion CARES Act, passed in March, has largely been allocated through federal and state loan and grants programs. The $600 weekly unemployment payments attached to that bill ended in July, and many analysts say another stimulus package is urgently needed to help individuals and businesses get through the winter.
In a recorded message at the event, U.S. Sen. Patrick Leahy, D-Vt., said Congress knew when it passed the CARES Act that more money would be needed. He blamed Senate Majority Leader Mitch McConnell for holding up a Senate version of the relief package the House passed Oct. 1.
“It’s been frustrating,” Leahy said. “He has somehow found the time, even during the pandemic, even during the time when the Senate is closed down because of the spread of the virus, to try to ram through another Supreme Court nominee. That could wait; there is no urgency for that, but there is an urgency for relief for all of us.”
‘Normal’ could be years away
Mandel presented a “back-to-normal” index that shows the nation and Vermont are still far from that place. While Vermont’s employment rate dipped a little lower than the nation’s as the state instituted widespread business closures in April and May, it is now experiencing slightly more growth, with hiring hitting 90% of pre-pandemic levels in September before dipping to around 85% in October. At its lowest point, in mid-April, hiring in Vermont dipped below 50% of pre-pandemic norms. The nation’s lowest point was 60% around the same time.
Mandel steered clear of focusing on Vermont in her presentation, but she speculated that Vermont’s economy was bolstered by the state’s low infection rate.
“And it could be helped by some people living in vacation homes who wouldn’t normally be in the state,” she said.
Mandel is an economist who works for Moody’s Analytics, which is separate from the bond rating agency. In presenting scenarios, the research group created a baseline that represents the most probable outlook.
Under that scenario, which assumes the pandemic hit its worst point in the summer, the economy doesn’t recover fully until 2023. But risks to that outlook are high, cautioned Mandel. In the “severe stress” scenario, which takes into account a second round of outbreaks, the economy would dip into recession again at the end of the year, and it would take the nation until 2027 to recover the number of jobs it had in February this year.
“The baseline between 2023 and 2027 is a fair range of what we can see in terms of recovery,” Mandel said.
That worst-case scenario describes a shorter recovery period than the one that dragged on for more than a decade in some sectors after the recession of 2007-2009. While Moody’s analysts are counting on the development of a vaccine to turn the economy around, when that happens, the nation won’t be struggling with a housing crisis and credit problems, as it was then, Mandel said. She expects the labor market to bounce back much more quickly.
“There isn’t that underlying imbalance now; it’s really external,” she said of the cause. “There’s a pandemic and it has shut things down. If we can get that solved, assuming the federal and state governments can help business enough, we should be able to get a faster recovery.”
Mandel predicted that if stimulus money does start flowing early next year, the nation should avoid another dip into recession. If they don’t, she said, states will suffer “unprecedented stress.” But consumers have been saving money, she noted.
“Hopefully that money will be able to keep them going a little bit,” she said. “But definitely look for conditions to deteriorate a bit over the next couple months.”
The chamber’s legislative breakfast generally draws a crowd; the online version had only about 50 listeners. One was marketing consultant Tim Volk, a former partner at KSV. He said he found Mandel’s presentation “pretty sobering,” but added that he’s conscious that economists’ projections can change.
“Reality is often a little different,” he said.
On the brink
Tom Donahue figures he’s at the edge of a cliff.
He’s head of BROC, the community action agency for Rutland and Bennington counties, and he sees trouble ahead. His agency anticipates the pandemic will linger through 2021, and things are about to get worse.
Vermont has five community action agencies, born in the War on Poverty years of the 1960s. The private, nonprofit organizations administer a bunch of federal and state programs to help people in need.
All five agencies are seeing the same things, Donahue said: As benefits begin to fall off for both businesses and individuals, “the numbers of people turning to us are increasing, with many new faces — the suddenly unemployed, or furloughed, people who never expected to lose their jobs.”
Now, though, they’re beginning to turn to the community action agencies for critical needs — help with food, electricity, heat, and so on.
“We fully expect that to continue through 2021,” Donahue said. What he’s seeing now, he said, is “the tip of the iceberg.”
He’s hoping for a new federal aid package that will help people and businesses survive until the Covid-19 vaccine is developed and administered widely. “We don’t expect to see a turnaround until the vaccine is being administered. If there’s a large gap between now and then, people and businesses are going to be hurting.”
And, he points out, when businesses hurt, people lose their jobs, and the health of businesses has a lot to do with the overall health of the population.
Donahue praised the Legislature for approving $1 million in aid for microbusinesses, the kind with one or two people, just before it adjourned Sept. 25. The five community action agencies received 207 applications for grants of $2,500 to $5,000 each. The program runs until Dec. 20, but demand was so strong that “we distributed that ($1 million) by Oct. 13.”
Other things are happening now — helping people catch up on unpaid utility bills, organizing major food events like the Farmers to Families program that will deliver 500 boxes of food to people Thursday morning in Bennington, and signing fuel contracts that ensure the community action agency can get people the oil, wood and propane to heat their homes this winter.
While his agency is planning for next year, he said, “everybody just wants to get out of 2020.”
And Donahue and his staff are preparing to help solve whatever terrible problems the pandemic causes among Vermonters.
“We’re like the fireman who runs into the burning building when everybody else is running out,” he said.
VTDigger editor Tom Kearney contributed to this report.
