The U.S. economy has added jobs every month for more than 10 years straight, defying expectations with a record stretch of prosperity.
But the resilient labor market is facing dire threats from the steadily expanding coronavirus outbreak, posing a major risk for President Trump as he runs a reelection campaign claiming unprecedented economic success.
With more than 230 confirmed cases of COVID-19 across 21 states, Americans across the country are facing school and office closures, canceled events, social withdrawal and potential shortfalls of vital imports from China and elsewhere.
The burgeoning outbreak has plunged financial markets into a correction, induced an emergency Federal Reserve interest rate cut and unleashed a cascade of canceled vacations, conferences and conventions.
Economists have dismissed the chance of a quick rebound from efforts to contain the disease — and have gradually raised the odds of a sharp slowdown ahead of the 2020 election.
Trump and his top economic adviser, Larry Kudlow, have sought to calm anxiety surrounding the economy and the administration’s response to the virus. A pandemic-driven recession could eviscerate Trump’s chances in November, and his team is working hard to bolster consumer confidence ahead of a likely downturn.
When asked Friday morning about the chance of a slowdown, Trump asserted that Americans were spending money domestically instead of traveling overseas and expected financial markets to “bounce back” quickly.
Trump also cited Friday’s strong jobs report showing the economy exceeding expectations by adding 273,000 jobs in February.
But despite his optimism, those figures are based on surveys taken around Feb. 12, two weeks before community spread of the coronavirus in the U.S. had emerged.
Broader spread of the virus could force widespread social withdrawal, dampening the vibrant consumer spending and confidence that underpinned the economy and supported a record-breaking job market for more than a decade.
Economists warn that the stellar pace of recent job gains could slow to dangerous levels if the U.S. is forced to bunker down.
“Once unemployment starts to notch higher, that’s when recession becomes a real threat,” Moody’s Analytics chief economist Mark Zandi told reporters this week, warning of “a self-reinforcing vicious cycle” of layoffs and consumer panic.
“High unemployment makes people nervous. They pull back on their spending or they become more cautious in their spending. That causes businesspeople to become more cautious in their hiring,” he said.
The U.S. has added an average of 243,000 jobs in each month since November, accelerating from an average monthly gain of 179,000 jobs throughout 2019, according to Labor Department data released Friday.
Zandi estimates that the U.S. must continue to add at least 100,000 jobs each month to keep pace with population growth and prevent the unemployment rate from rising.
The American economy’s heavy reliance on consumer spending and service sector jobs also poses threats unique to the U.S. and other rich nations, argued Austan Goolsbee, the former top economic adviser to former President Obama.
“For all the talk about the global ‘supply shock’ set off by the coronavirus outbreak and its impact on supply chains, we may have more to fear from an old-fashioned ‘demand shock’ that emerges when everyone simply stays home,” Goolsbee wrote in a Friday op-ed for The New York Times.
The looming threat of a coronavirus-driven slowdown has boosted pressure on policymakers to pump the economy with swift and powerful stimulus.
The Fed is expected to cut interest rates again at its March 17-18 meeting as a preemptive move. Democratic lawmakers have introduced legislation to offer paid sick leave to employees and economists across the spectrum have called for direct support for businesses that may be forced to shutter.
An $8.3 billion emergency coronavirus spending package signed by Trump on Friday also included $1 billion for loans to small- and medium-sized businesses to weather the slowdown.
Kudlow told reporters Friday that the administration would consider “timely and targeted” aid to businesses and workers in industries sensitive to the downturn, rebuking calls for a larger stimulus plan akin to the 2009 bill enacted after the Great Recession.
“The story I am trying to tell is a story of timely and targeted microforms of assistance, not gargantuan, across-the-board, throw money at the problem, which has not worked in the past,” Kudlow told reporters at the White House.
“We think that we will get out of this in months,” he continued.
Morgan Chalfant contributed.