Experts explain what news about unemployment, stock market actually means for Tennessee

The arrival of COVID-19 triggered stay-at-home orders, shuttered businesses and sent unemployment claims soaring this spring, leaving the Tennessee economy cratered and hundreds of thousands unemployed.

Unemployment rates surged from 3.3% in March to 15.5% in April. Over 400,000 jobs were lost due to the pandemic. Nashville also registered the largest drop in consumer spending across U.S. metros, according to data collected by an economic tracker created by researchers at Harvard and Brown universities.

But recent data and experts indicate the Tennessee economy is showing signs of life — albeit tentative ones. As of October, the unemployment rate for Tennessee sat at 7.4%, according to the Tennessee Department of Labor and Workforce Development. Furthermore, of the 403,100 Tennessee jobs lost during the pandemic, 272,100 have been recovered, data from ThinkWhy showed.

Unemployment claims surge in Tennessee

Unemployment claims have skyrocketed in Tennessee during the COVID-19 outbreak. The number of claims continued with weekly certifications rose from just over 16,000 per week in mid-March to more than 300,000 by late April.

But while jobs have steadily recovered, the pandemic continues to hamper the leisure and hospitality industries. Additionally, as of mid-November, nearly 42,000 Tennesseans were still waiting on unemployment benefits.

As another wave of the coronavirus takes hold and the holidays and winter months close in, hopes of continued recovery are uncertain, experts say. So what factors really determine economic recovery as the pandemic drags on and a new surge of cases, hospitalizations and deaths spread across the state and the nation?

Here's what two experts had to say.

Experts weigh in: How hopeful is Tennessee's recovery?

Dr. Marianne Wanamaker is an assistant professor at the University of Tennessee's Haslam College of Business and a former senior economist for the President's Council of Economic Advisors.

The biggest concern for the Tennessee economy right now is employment, according to Marianne Wanamaker, who is a professor of economics at the University of Tennessee.

She said that she and other economics experts were surprised at how well the economy is doing, considering the havoc wreaked by COVID-19.

“We’re way ahead of where we thought we’d be at this point. If you had asked economists, ‘What’s the pattern? What’s the path forward?’ in March or April, I think they would’ve told you that the bottom of the job market might not come until late summer or early fall. And that wasn’t true — the bottom of the job losses came in April."

Since then, Wanamaker said there has been steady growth in employment, both in Tennessee and nationwide. She attributes that in large part to the government getting money into the hands of individuals and small businesses relatively quickly this spring.

"That allowed us to return to normal once the governor said in May that all these (different) types of businesses could reopen," she said.

But now, staring down several months of colder weather, increased indoor activities and the rampant spread of the virus, she worries that growth may stagnate, at best, or regress altogether.

Jay Denton, who is the chief innovation officer and senior vice president for business intelligence at ThinkWhy, said Tennessee is showing similar signs to the rest of the nation in terms of recovery — but that the pace of recovery is being moderated by the continued rise of COVID-19 cases.

ThinkWhy, based in Dallas, offers software called LaborIQ that draws from federal data and salary information to track the economy and workforce in the U.S.

"We are likely facing a bumpy road the next few months as policy makers decide how to handle the new wave of infections," Denton said. "The key will be for a vaccine to get us to the other side of the pandemic. Even with a vaccine rollout in early 2021, it will take some time for it to become available and effective enough to substantially lower the counts to a point that things can return to normal."

Until then, he said businesses will need to find ways to innovate to stay afloat. He said he expects the market to gain "more significant traction" by mid-2021, hopefully leading to a rebound of hiring and consumer confidence.

What do all the big headlines about the stock market mean for me?

Wanamaker said the stock market is a good indicator of the sentiment of large businesses, but not the economy overall.

A Pew Research study published in September also echoed that concept, based on a 2019 study. Overall, the study found that 48% of Americans pointed to wages and incomes and 45% pointed to the availability of jobs as "contributing a great deal" to how they felt about the economy. Just 25% pointed to the stock market's performance.

“It has had an outstanding year," Wanamaker said of the stock market. "You can basically view that as a bet that small business is going to suffer and big business is going to win at the end of the day.”

Denton said the largest impact on the job market was among younger people who work lower wage jobs. To them, big news about the stock market surging and doing well overall may not feel like it affects them much at all.

The Pew study also showed that upper-income people were more likely to be invested in the stock market than those with lower income.

"Still, for the broader market, and especially thinking about business leaders, a strong stock market can provide some degree of optimism about future growth. Right now, we are in a major period of disconnect where the stock market does not seem to correlate to the general feeling of today’s environment," Denton said.

He also said it's important to remember that the stock market is forward-looking and not just representative of today's environment.

"The theme many economists have is that the economy itself is not broken, and once we get past COVID-19, jobs and business revenues will bounce back quickly," Denton said. "In essence, that is what the stock market represents."

Source: Knoxville News Sentinel, by Rachel Wegner, Nashville Tennessean

The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org

 

Published December 4, 2020