September brings college football and the optimism that team weaknesses have become strengths during an offseason dedicated to training and learning from experience. Considering this special time of year, especially in the deep South, how can we evaluate the state of our economy and small businesses 18 months into the pandemic? It’s important to separate the real economy that most people experience from Wall Street.
Much like our favorite college football teams beginning this season with high expectations, many of us have similar expectations for American economic recovery. Businesses have adjusted to the challenges that the pandemic has presented. Execution is better, and many business owners have reduced self-inflicted mistakes. But, challenges remain.
For many Americans, the unemployment rate matters most. The service sector has experienced the most challenges, as 50 million jobs were lost over the course of the pandemic, according to Armada Corporate Intelligence. Shutdowns were expected to be temporary, and while Georgia may have reopened partially last summer, many states did not. In some cases, states lost essentially a year of productivity and growth.
The uneven recovery has been exacerbated by the billions spent on extended unemployment benefits, which made sense when jobs were scarce, and Americans had limited social opportunities. But, as the economy improved, 23 states, including Georgia, opted out early. A positive sign, according to Forbes, is the more than 800,000 who were newly hired nationwide in July, and the expectation that the trend will continue.
Since the partial reopening began, businesses have struggled to find labor. For some industries, including manufacturing, construction, transportation and health care, this is nothing new. Unfortunately, many who lost their jobs do not have the skills to take on jobs in those industries. In addition to government benefits, moving education to a virtual format required millions of parents to stay at home. And, as mature citizens left retirement communities, they required additional care from their adult children, too.
So, where do we go from here? Most economists expect an increase in hiring as federal benefits expire, and early results seem to confirm that. Most job openings in the service sector should be fillable, but there still will be significant challenges for skilled labor. However, the service sector once again could see its recovery stalled by the raging delta variant. Therefore, many employers are considering either vaccination mandates or encouraging vaccinations through incentive programs.
It’s likely we will see more businesses close, events canceled and travel reduced until this variant is under control. Consumer spending comprises 70% of the U.S. gross domestic product, so a healthy retail and service sector is critical. Goldman Sachs recently cut its expectations of economic expansion to 8.5% in the third quarter and 5% in the fourth quarter of this year. The company expects a return to 2% growth in the second half of 2022.
A major concern, in addition to the virus, is that the longer we work remotely, the longer the recovery of the service sector will be. Unfortunately, the pandemic has become so politicized and polarized at this point, there is a limited amount the government can do. Our country has borrowed at record levels, and Congress must wrestle with a contentious debt ceiling increase that could lead to a government shutdown.
Just like football teams facing strong headwinds from elite competition, businesses are playing in an unpredictable environment. The government has tried for more than a year and a half to manage the pandemic. But, the increased unemployment program did not incentivize Americans into training and education for new employment opportunities. We may well have reached a point where businesses will need to finish the job.
– Ryan Blythe is the founder of Georgia Trade School, which for the sixth consecutive year, was named one of the Cobb Chamber Top 25 Small Businesses of the Year.