economy

Election uncertainty could impact consumer confidence, economic recovery amid pandemic, experts say

Tuesday, October 20, 2020

Election fallout could prolong economic recovery, experts say

A polarized electorate and the possibility of a contested election are raising concerns that they will be a drag on an economic recovery after COVID-19.

SAN FRANCISCO (KGO) -- A polarized electorate and the possibility of a contested election are raising concerns that they will be a drag on an economic recovery after COVID-19.

Stanford researchers say they've studied patterns globally. The economy is part of our focus on Building A Better Bay Area.

Telltale signs of a troubled economy are everywhere. Retail stores have closed. Restaurants have either closed or are limping along. People are moving because they can remote work from almost anywhere where it's cheaper to live.

The economy shut down abruptly due to the coronavirus pandemic, leaving ghost towns in normally bustling business and retail areas, and economists say the road to recovery will not be easy.

The pandemic is the number one reason for uncertainty. Business leaders tell researchers so is politics.

"Number two is the election," said Stanford economist Dr. Nicholas Bloom. "And you know, anyone that watched the presidential debate and sees how opposite the candidates are in substance and in style, you can see how this really matters."

Economic recovery could well be slowed by three to six months because of uncertainty, he believes. Companies are unsure whether to hire, lay off, reduce office space, or invest.

"The economy was roughly 10% down, but now back to about 5% down, but catching up the remaining 5% is going to be hard," said Prof. Bloom.

Women of color say they are feeling the pinch of the economic fallout caused by COVID-19 more than others.

Besides the election, there's the potential of a lame duck period between November and January when Congress could be facing its own uncertainty. Polarization among voters even after the election could impact consumer confidence and impact holiday spending.

"If Christmas sales are very poor, I'm nervous you're just going to kind of limp on with this dreadful economy that isn't truly as bad as it was in the summer of 2020," Bloom said.

Uncertainty could also be prolonged if election results are contested as happened in 2000 involving George Bush and Al Gore. Historically, uncertainty then was not as heightened as it appears to be today.

"It was an era in which voters didn't view the parties as nearly as far apart ideologically as they view them now," said Stanford political scientist Dr. Jonathan Rodden.

Both professors, in their work for Stanford's Institute for Economic Policy Research, believe the months ahead will make the post-COVID recovery prolonged.

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