COVID-19’s viral spread beginning in early 2020 set back every economy on the face of the planet. Its downward effect on wages, employment, output, and other positive economic indicators devastated workers’ incomes (and job status), industries’ profits, and governments’ treasuries.
The United States federal government’s massive fiscal response to the pandemic mitigated some of these negative externalities over the course of one year, but the sustained impacts of the pandemic-induced recession continue to endure: unemployment is still almost double what it was in early 2020, many families lost loved ones to the virus, many businesses (particularly small businesses) went out of business, and many industries are still struggling to get back on their feet. In Arizona, tourism, entertainment, retail, and nonfarm jobs are still suffering.
Arizona economist Jim Rounds has argued that the best economic stimulus is widespread vaccination against COVID-19. Indeed, since the approval of the Pfizer, Moderna, and Johnson & Johnson vaccines, the economy has seen growth. Nonetheless, less than half of Arizonans have received one shot, let alone two (Johnson & Johnson only requires one shot, whereas Pfizer and Moderna require two).
Figure 1
SOURCE: UNIVERSITY OF ARIZONA – COVID-19 TRACKING ECONOMIC IMPACTS
Policies aimed at expanding vaccinations and easing the public’s willingness to frequent businesses could accelerate the state’s post-COVID economic recovery. As the economic engine revs up, the maintenance of public health will be critical to the expansion of private-public sector collaboration, wage growth, trade, immigration, and economic clusters. The easiest path to securing all of these aims is to prioritize vaccine distribution.
Beyond these proposals, larger obstacles face the international, American, and Arizonan economies. While the United States is expected to reach “herd immunity” within months, Europe will not reach this state until late 2021, and many other nations and regions still have no timeline for this milestone. Accelerating the international distribution of vaccinations could promote the health and wellbeing of the domestic economy, particularly considering Arizona and the United States’ extensive foreign trade integration.
Further, inflationary pressures could threaten markets and consumer prices. Already, the United States has reported a 13-year peak in inflation in April of 2021, with the “rate of inflation [jumping] to 4.2% from 2.6% in the prior month.” This inflation is largely expected, particularly considering the passage of several federal stimulus packages, but it could diminish the value of wage gains.
The following policies might be pursued by Arizona leaders to ease Arizona’s post-COVID economic recovery:
• Collaborating with the federal government and foreign governments to distribute excess vaccines to nations with lower vaccination rates (Mexico in particular, considering their proximity).
• Urging the federal government to maintain manageable levels of inflation, so that wage gains are not eaten up by rising prices.
• Provide incentives for vaccinations by partnering with Arizona businesses, cities, and counties (incentives could range from free food and beverages to coupons to favorite restaurants and bars).
As Arizonans look forward to a post-COVID economy, the fundamentals of the state’s exploding growth should not be neglected. Vibrant public-private partnerships, a foundationally pro-growth regulatory agenda, expanded trade relations with inter- and intra-national neighbors, and an embrace of smart immigration policies could provide a formula for continued economic success.
This story was originally published at Chamber Business News.
