Four months into this economic contraction, the auto industry has adapted brilliantly, but most of the rest of the picture looks awful. So Congress is going to have to write another big batch of checks.
The coronavirus took a serious bite out of the U.S. economy when several states — including major car-buying markets and automaking regions — had to shut down business activity to try to slow the rise of infections and get a handle on the pandemic.
But it worked pretty well, flattening the curve for a while and allowing manufacturers and most retailers to figure out how to return to work safely.
A lot of economic damage was mitigated by the $2 trillion Coronavirus Aid, Relief and Economic Security Act, which includes the Paycheck Protection Program and enhanced unemployment benefits that expire at the end of the month.
Other industries have not managed to adjust like America’s automakers, suppliers and dealers, especially those that involve travel, entertainment and recreation. At the same time, too many Americans, stir-crazy from the original shutdowns, overextended the reliberation of human activity leading to record numbers of new cases and even — gulp! — the reimposition of restrictions in a growing number of locations.
So the next round of aid will have to be widespread again. But it still needs to keep auto industry in mind: 37 percent of U.S. consumers say they are delaying large purchases and 21 percent are concerned about making upcoming payments, according Deloitte’s State of the Consumer Tracker.
About 30 percent of unemployed Americans are fearful they will lose their jobs permanently. Deloitte said the level has remained “worryingly consistent since mid-April, suggesting that consumer concerns regarding near- and long-term financial well-being have not improved.”
Most telling for the auto industry is that almost half of U.S. consumers (47 percent) are now planning to keep their vehicle longer than they originally expected. In a market that has seen fleet demand evaporate, shoppers delaying purchase plans is most unwelcome.
The auto industry needs liquidity, stability and consumer confidence. The Fed has stepped up with liquidity, but the other two are more of a challenge.
Congress is going to have to reinforce the safety net to prevent a far deeper economic disaster. A flurry of repossessions, foreclosures and bankruptcies can quickly snowball.
There probably will be another round of payments directly to citizens — it may be smaller and more targeted than the last one. And assistance to state and local governments — particularly with an expensive school year coming up — is going to be needed.
There may still be some form of enhanced unemployment: A report in Forbes said Democrats and Republicans both want to do something to help people who have been furloughed or unemployed because of the virus.
But it seems the $600-a-week unemployment insurance kicker will go away — it protected the vulnerable but perverted the labor market, dealers and others say.
What the economy doesn’t need is carte blanche for employers. Senate Majority Leader Mitch McConnell has insisted that any further stimulus must include liability protection for businesses, hospitals and schools. He’s afraid a flood of frivolous lawsuits will stifle entrepreneurs and other job creators. But there’s a very real risk of unintended consequences, because a system such as that, which protects bad actors, also serves as a punishment and disincentive to companies that follow best practices for safety.