Nearly a month into quarantine, questions regarding the various economic impacts on UVA graduates and their families are prominent. After appearing in an UVA Online Panel, we talked with McIntire School of Commerce Professor David Smith about the impacts of this crisis.
Before this global pandemic, Professor Smith stressed that the economy was “quite strong,” and that a recession was not imminent. Today, marks a different story, “given the unprecedented slowdown in the global economy as a result of the pandemic, I would say that there is a very high likelihood that we are already at the start of what will turn out to be a recession.” The most terrifying aspect of this pandemic is that there is no end in sight. Smith finds it difficult to predict how the economy will recover and which direction the recession will take. In this time of uncertainty, it can very difficult for families to plan for the future with no clear end in sight.
After weeks of debate, the government finally passed a relief package to aid Americans on March 26, 2020. Smith conveyed to us that the historical significance of this pandemic and the stimulus packages that the government has passed are “unprecedented” while emphasizing that, “Any spending we do now will have to be paid for in the future and the bill will be enormous” but the spending to be “required” and “good.” He explained that the impacts of this spending on future generations will be contingent on how quickly the economy comes back, which could signal to foreign investors our ability to pay back this debt. While this spending is monumental, he warned that if the economy does not come back quickly, the government will be forced to spend more money in order to boost the economy, which could have even more dire consequences.
However, not every American will benefit equally. The stimulus promises $1,200 to every “single, non-dependent adult” earning then $75,000 and $2,400 to married couples with no children earning less than $150,000. Once families with children make over $200,000, they will not receive aid from this stimulus. However, if students are claimed as a dependents by their parents, they will not be eligible for this check. Despite this caveat, students can apply for unemployment benefits, even if they only worked part-time or they were self-employed. This is good news for students and their families who are currently struggling to make ends meet, like the other 17 million Americans who have applied for unemployment as of April 9th.
In these harrowing times, Smith provided extremely pertinent information for graduating fourth years who might be facing heightened anxiety at the prospect of being thrust into a job market that is not open right now. With no clear path to reopening the nation, making decisions such as whether or not to enter the workforce or proceed more education have become even more challenging. Historically, there are upticks in interest in post-university education during a recession as a result of layoffs. Smith wants to remind students that after a recession, the job market becomes more competitive, and more education can help applicants stand out, and his ultimate advice is to “not give up on their career passions, even during challenging times,” regardless of their desires.
He also emphasized that despite the prospect of a more challenging job market,“They [UVA grads] will graduate from one of the top educational institutions in the country,” and that this will provide job opportunities when the job market is reopened and is fully functioning.
Unlike other economic experts who have expressed worry about the effects of social distancing on the long-term American economy, Smith does not believe that opening up the country immediately guarantees that the economy will bounce back because consumers will feel a heightened sense of responsibility, “…I believe we all have a sense for the serious risks involved with spreading the coronavirus and becoming ill from it.” In order for our economy to roar back, Smith advocates for further testing to make sure that each community is safe to return to more normal activities. Of course, life may never be the same after COVID-19, as social distancing may become integrated into American life forever.