James Parrott, Economist at the Center for New York City Affairs Presents the Facts About the Upcoming Economic Crisis

The Coronavirus crisis is affecting every aspect of American life, and the toll on the local and national economy is likely to be long-lasting. James Parrott, the Director of Economic and Fiscal Policies at the Center for New York City Affairs (CNYCA) at The New School, is one of the leading authorities on the local economy and since the crisis began has been a go-to source for the press and for policy advocates searching for timely data–and for a sense of how the epidemic will affect the economy.

“I’m trying to shape public understanding of what the economic impact will be,” Parrott said in an interview with the New School News. “My concern is for average and low-income workers. It’s important to accurately document what’s going on and get accurate information on how this will affect low-income workers. I also work with advocates and those who influence public policy to shape appropriate public policy responses.”

Since the World Health Organization declared the virus a public pandemic on March 11, Parrott’s has been interviewed by many media organizations seeking his expertise, including The New York Times, The Wall Street Journal, Forbes, among many others.

Parrott compares the crisis in New York City to the aftermath of 9/11. That crisis had a much broader economic impact on low-income workers than was initially believed, displacing many, and Parrott’s fiscal policy analysis was instrumental in changing public policy. His research helped bring more than $20 million in federal funds to New York to aid dislocated workers.

The human cost and psychological impact of the coronavirus epidemic, like that of 9/11, is immeasurable, but Parrott believes the economic crisis will be far greater than it was in 2001. The coronavirus outbreak could ignite a prolonged worldwide recession.

Parrott’s most recent estimate is that the city has lost 750,000 jobs in the cultural restaurant, retail, airline, and other sectors — and wages of $1.5 to $2 billion per month. He says that he will release more comprehensive data in the next several weeks reflecting a close examination of demographic information, such as the way the crisis is affecting people of various levels of income and access to health insurance.

Parrott says that the crisis will continue to take a disproportionate toll on hourly workers, independent contractors, restaurant and hospitality employees, and small businesses.

“Small businesses are disproportionately affected by prolonged shutdowns,” Parrott observed. “If the public health crisis lasts only a couple of months, spending will be deferred, but if it lasts longer, some businesses will never come back.”

He predicts that a significant number of small businesses will close their doors for good by the time the crisis ends.

Restaurants are particularly at risk, since “even in the best of times, their operating margins are slim.”

Last year, Parrott co-authored a report that demonstrated how the increase in New York’s minimum wage for restaurant workers had helped the industry thrive, contrary to “fears of massive job losses, $20 Big Macs, and shuttered restaurants.”

“The mandatory closures will have harmful effects that could jeopardize and undo all of these gains,” he says.

Parrott is most critical of the recently passed $2.2 trillion federal aid package, the Coronavirus Aid, Relief and Economic Security (CARES) Act, arguing that more needs to be done. He says that there’s little in the act for state and local government relief, given what is sure to be a shrinking tax base and lost revenue, and that the act is time limited, with many of the benefits expiring by the end of July. The act, he added, reflects a punitive attitude toward low-income people who don’t file tax returns and the undocumented. Even if one person in a household is undocumented, the rest of the household will not receive financial relief under the CARES Act. Parrott is working with advocates to see whether the city can provide help in the absence of federal relief.

He criticizes the CARES Act’s “less-than-token $3.5 billion to help child care providers” and questions the U.S. Small Business Administration’s “capacity to turn around emergency loan applications from the thousands of affected small businesses and nonprofits in New York.” Parrott also asks whether workers and small businesses will receive their unemployment compensation in a timely way, as the “State Labor Department’s computers crashed, and under-staffed phone lines have meant that many still haven’t been able to file a claim.”

One of the upsides to this stimulus package is that unemployment assistance covers freelancers, Uber and Lyft drivers, independent contractors, and those who work in the performing arts, all of whom in the past have not been entitled to compensation.

“We need a very large fourth round of stimulus soon that addresses the gaps,” he says. “People need continued assistance for as long as necessary, particularly state and local fiscal relief, and hopefully the situation with the undocumented can be rectified. Decisive and prompt action on the fourth round will help restore confidence and put a safety net under the economy, assisting in possibly avoiding a depression. If we wait, that will certainly make things worse. Going forward, we will need to rectify the absence of work protections for millions of gig and other workers, as well as re-establish the essential importance of well-functioning government.”

This article was originally published in New School News

About the Author