By Gregory Kovsky / For The Herald
Washington state’s economy may be reopening, but any optimism must be accompanied by caution. The bleeding is nowhere near stopped.
Our state’s unemployment rate still exceeds 15 percent, with Washington losing hundreds of thousands of jobs due to the COVID-19 pandemic. Making matters worse, the “official” unemployment rate likely undersells just how precarious the labor market is for job-seekers and employees alike. Credible estimates pin unemployment closer to 20 percent.
In real terms, more than 1.2 million Washingtonians have claimed unemployment benefits in recent months. Look at it this way: The equivalent of Seattle’s entire population went on unemployment, plus hundreds of thousands more people. At the same time, the state government is dealing with a backlog in claim processing, leading to delays in the disbursement of benefits.
And this is just the short-term bleeding. We cannot blindly assume that an economic reopening will immediately lead to business stability and expansion. We cannot expect that the mere mention of the word “reopening” will put the unemployed back to work and motivate consumers to spend their hard-earned dollars. There is no “on-off” switch for economic activity.
This is confirmed by recent business formation statistics. According to The Seattle Times, nationwide new business formation is over 20 percent above last year’s pace. In Washington, the rolling four-week average is essentially flat (barely above 1 percent).
While one expects business formation to see an uptick after a prolonged economic shutdown, the opposite is happening. We are lagging behind. Entrepreneurs are struggling to turn their ideas into new enterprises, inevitably hurting job-seekers and employees who rely on small business for career opportunities. Without new businesses, it may take Washington’s economy many months — if not years — to reach and exceed pre-pandemic levels.
Those advocating for an extended shutdown need to bear the long-term repercussions in mind. A three-month shutdown may lead to a three-year dip in economic activity. These are uncharted waters, and haphazard attempts to “flatten the curve” can indeed make the “cure” worse than the disease.
Of course, the coronavirus still poses a threat. But it is not the grave threat that we feared six months ago. According to the Centers for Disease Control and Prevention, COVID-19 cases in the United States may be 10 times higher than officially reported, which also means the coronavirus may not be as deadly (in terms of total fatalities) as initially thought. And, given that the coronavirus was already only barely more dangerous than the seasonal flu (in terms of the fatality rate), the novel virus is not a major threat to the overwhelming majority of Washingtonians.
At-risk populations — and those in close proximity to them — still need to be careful with their comings and goings. But we cannot sacrifice our entire state economy at the hands of a virus that poses little risk to 99 percent of residents.
For that reason, we need to continue on the path of gradual reopening. Gov. Jay Inslee must proceed in implementing his multi-phased blueprint, opening up certain economic sectors one by one. We simply cannot turn millions of people into victims because of a virus that may seriously threaten thousands.
The stakes are too high to turn back now. Let’s keep moving forward; and stop the economic bleeding.
Gregory Kovsky serves as president of International Business Associates, headquartered in Bellevue, and is a partner of the Job Creators Network Foundation.