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How the pandemic has shifted U.S. labor from services to goods

The last major economic report before Election Day indicates a 7.4 percent growth rate in economic output during the year’s third quarter. It’s a sharp rebound from the record plunge of the previous quarter, and the fastest pace since World War II. But economists point to federal stimulus as a key driver -- and that’s running out. The Washington Post’s David Lynch joins Judy Woodruff to discuss.

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  • Judy Woodruff:

    Today provided the last major economic data before the election, and it gave the president some good news.

    Economic output this past quarter grew at the fastest pace on record since World War II, 7.4 percent. That's a sharp rebound from the record plunge of the previous quarter.

    But 23 million people are still receiving unemployment assistance. And one more data point: As the president and former Vice President Biden visit Midwestern states in these final days, a new analysis finds private job growth in Michigan, Wisconsin and Ohio was about half the national average during the past four years.

    David Lynch of The Washington Post is reporting on all of this, and he joins me now.

    David Lynch, welcome.

    So, this news about economic growth on the surface sounds very good, 7.4 percent in the third quarter, after being down 9 percent the previous quarter. But put it in context. How much of a bounce-back is it?

  • David Lynch:

    Well, the good news is, it was a very strong quarter. But it came after a terrible quarter, of course, in the second quarter, when the economy was put in a deep freeze as we battled the pandemic.

    In context, we have clawed back about two-thirds of what we lost since the pandemic hit. But this is still a deeply damaged economy that has a lot more healing to do.

  • Judy Woodruff:

    And you were talking to us about the effect of a stimulus package. There was one in the spring. As we know, there has not been agreement on another one.

    Just today the speaker and the White House were trading charges about who's at fault. How much difference might it be making right now if there were another economic aid package?

  • David Lynch:

    Sure.

    Well, this is the critical dimension. This is one of the main engines that powered the strong growth in the third quarter, and it's petered out. And you don't have to take my word for it. The chairman of the Federal Reserve, Jerome Powell, and other Fed officials have been remarkably blunt in their public statements, saying the Congress and the administration need to do much more to keep the economy going.

    And since that stimulus is now gone, effectively, and it will be weeks, if not months, before there's a chance to cobble together a new package, the economy is going to have to fly on its own at the moment, and all engines are not running.

  • Judy Woodruff:

    David Lynch, can you say, in a nutshell, what parts of the economy have come back and which are still struggling?

  • David Lynch:

    Sure.

    There's been a major reallocation below the surface of the economy, from services spending to goods. People are out there buying cars, buying homes, buying refrigerators. And they're using all the money, in many cases, that they would have spent at restaurants, at hotels, on airplane flights, at theater performances, baseball games, all the things that people don't feel safe doing, with the pandemic still prevalent and, indeed, spreading uncontrollably in many parts of the country.

    There's been this shift from services to goods. That's causing or coincident with a reallocation of labor, as people who used to work behind the desk at a hotel or a rental car counter at the airport have been laid off, and now must find other work.

    And that's why the labor market is still in so much trouble and will probably lag output as we continue to recover.

  • Judy Woodruff:

    And, meantime, there is manufacturing.

    We remember very well President Trump early on, after he was elected, said that he was going to focus on building up manufacturing in this country. He made promises about keeping jobs from going out of the country.

    How has that worked out?

  • David Lynch:

    Well, it's been something less than a complete success. The president did have a good performance in the first couple of years of his administration in terms of bringing back or at least growing some manufacturing jobs, almost 500,000 new jobs in the first couple of years.

    But that growth started to taper off in the middle of 2018, and really was down to very little by late fall of last year, even before the pandemic hit and threw things into reverse.

    And if you take the longer view, the country is still about five million manufacturing jobs below where it was in the year 2000, before China joined the WTO, for instance. And the sort of broad repatriation of factory jobs that the president promised and that he continues to promise now if he has a second term has yet to materialize.

  • Judy Woodruff:

    So, bottom line, what about the jobs that the president promised he was going to keep in this country, and, specifically, companies like the Carrier Corporation in Indiana?

  • David Lynch:

    Sure.

    Well, that was really the signature initiative of his first days as president-elect. You recall he leaned quite hard on the CEO of Carrier's corporate parent at the time to try and keep several hundred jobs in Indianapolis that the company had earmarked to send to Mexico.

    And the president did have a limited success there. He was able to get the company to agree to keep about 800 jobs there. But another 1,300 Carrier jobs moved offshore soon after. More broadly, other companies in Indiana, of course, have continued with their own reallocation of labor, sending jobs to places like Mexico, China, and India.

    So, even if it's not continuing with the same steady flood that we saw in the first years of the 21st century, it does continue, and it continues because companies are responding to more than just presidential exhortation and the bully pulpit. They have got to make the bottom line work.

    And until factors like worker training and education and the like are dealt with in a more comprehensive way, the logic still drives them to other places.

  • Judy Woodruff:

    Complicated picture, and very tough for people who work for those companies in that sector.

    David Lynch of The Washington Post, we thank you very much.

  • David Lynch:

    Sure.

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