South Carolina's economy may be slowly recovering from the damage caused by the coronavirus pandemic this year, but a top official at the Federal Reserve said the public health crisis still poses significant risks for businesses and the state's workforce in the coming months.
Tom Barkin, president and CEO of the Federal Reserve Bank in Richmond, told members of the Charleston Metro Chamber of Commerce that progress on a vaccine might be improving, but he believes the COVID-19 will continue to affect spending habits, unemployment numbers and other parts of the economy until at least the middle of next year.
"That means a rough several months still, but daylight on the horizon," he said Tuesday.
Since May, South Carolina has added back 178,000 jobs that were lost when state leaders implemented public health restrictions earlier this year to control the spread of the virus.
Those numbers appear positive in comparison to the situation the state was facing in March and April. But Barkin pointed the U.S. has an estimated 10 million fewer jobs now than there was in February, and he emphasized that those losses are still worse than the estimated 8 million jobs that vanished in the depths of the Great Depression.
One of the biggest reason the unemployment rates for the United States and South Carolina have declined in recent months is because workers are dropping out the labor force and no loner actively looking for jobs. If those people were still considered part of the workforce, Barkin said the national unemployment rate would be closer to 9.4 percent rather than 6.9 percent.
Some industries in South Carolina, like manufacturing, have rebounded well, Barkin said.
But others, like the leisure and hospitality sector, still have far fewer employees than they did at the beginning of this year. Nationally, restaurants, hotels and other businesses in that industry were still missing 21 percent of the jobs they once supported, Barkin pointed out, and there's no clear indication yet of when those positions might return.
Barkin said his own habits are an indication that things haven't returned to normal yet. The first thing he looks at when trying to forecast the future of the regional economy, he said, is the number of confirmed coronavirus cases, the number of hospitalizations caused by the virus and the death count. Only then does he start looking at credit card spending reports, manufacturing productions and employment numbers.
Barkin isn't a medical expert, but he said the 150,000 new cases being reported per day last week is a clear indication that the country still has "a ways to go."
Federal Reserve chair Jerome Powell also addressed the health crisis Tuesday, saying the nationwide surge in confirmed cases could slow the economy in the months ahead by discouraging consumers from spending.
“We’re seeing states begin to impose some activity restrictions," Powell said in an online discussion with the Bay Area Council, a San Francisco-based business group. “The concern is that people will lose confidence in efforts to control the pandemic, and ... we’re seeing signs of that already.”
As he has previously, Powell called on Congress and the White House to respond by providing more stimulus spending.
“There hasn’t been a bigger a need for it in a long, long time here," he said.
Barkin said state and local governments in South Carolina are less likely to shut down parts of the economy again, as they did in the spring. But that doesn't mean the resurgence of the virus can't hurt businesses. The changes that people make in their day-to-day lives to avoid the virus is enough to damage parts of the economy.
"Consumers can do enough on their own," he said.
Barkin, whose Fed district is made up of five states and the District of Columbia, said he's heard from companies that currently have openings but can't fill them. That's something Dan Ellzey, director of the S.C. Department of Employment and Workforce, has also mentioned in recent months.
The problem, Barkin said, is the types of jobs that are available right now don't often fit with the people that are looking for work.
Most of the new jobs that are available, Barkin said, are in industries like manufacturing, technology and health care, which can require specialized training or education. But many of the people who are out of work lost jobs in restaurants and small businesses that don't require advanced skills.
Barkin called this problem a "labor market mismatch," and he doesn't expect it to be resolved any time soon. Just like businesses, Barkin said the virus is creating uncertainty for unemployed workers and making it difficult for them to determine what they should do next.
"These lower income service workers — think waiters — don't have the skills for the jobs that are available, and many are frozen in place," he said. "Many are not ready to move to another city, or to invest in training for their next job given the uncertainty around the virus."