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Experts predict long, slow climb toward economic recovery

A sign hung in the window at Sip Cafe in Post Office Square in Boston.
A sign hung in the window at Sip Cafe in Post Office Square in Boston.Craig F. Walker/Globe Staff

Let’s add patience to the list of requirements Governor Charlie Baker laid out Monday for restarting the state’s economy.

The reopening plan Baker announced Monday is a cautious attempt to protect public safety while gradually lifting restrictions on the 60 percent of the state’s economy that has been shut down since March 23. It will be well into summer, at the earliest, before most consumer-facing businesses are allowed to resume operations, and it will be a long, slow climb from there as consumers get comfortable with shopping in stores again, eating at restaurants, and going back to the gym.

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“We are going to see a lot of people unable to go back to work soon,” said Tom Kochan, a professor at the MIT Sloan School of Management. “Hospitality, retail, travel, restaurants — they are going to continue to be hit very hard by this.”

For that reason, Kochan said, the federal government should provide additional aid, such as extended unemployment benefits and more economic stimulus.

Massachusetts ranks among the states hardest hit by COVID-19, and it is one of the last to reopen its economy. Nearly 1.1 million people in the Commonwealth have applied for unemployment pay in the past eight weeks. That’s nearly 29 percent of the pre-pandemic labor force.

Nationally, the jobless rate is approaching 20 percent, the highest since the Great Depression, and the economy will shrink by 6 percent this year, according to the International Monetary Fund.

The US economy, as measured by gross domestic product, fell 4.3 percent during the Great Recession of 2007-2009, while unemployment peaked at 10 percent, according to the Federal Reserve. It took more than four years for the job market to fully recover.

“We’re going to be digging out of a very deep hole," said Mark Zandi, chief economist at Moody’s Analytics. "It’s going to be a long time until we’re fully out.”

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Still, Zandi and other economists expect workers to begin returning to their jobs in significant numbers as the state moves through the four phases of Baker’s reopening regimen.

Construction and manufacturing — which shed more than 100,000 jobs combined in the past two months, even though the sectors remained partially open — got the green light Monday to ramp up to full capacity.

Hair salon owners and pet groomers, car washes, lab and office space workers, and retailers with curbside pickup will get their turn next Monday.

Managers at Therapedic of New England were completing plans to bring back about 60 factory workers to the Brockton mattress maker this week.

According to partner Mark Savel, Therapedic has been buying masks, gloves, plexiglass, and other supplies to comply with any new state hygiene and social distancing measures.

Savel — whose mattresses are sold at retailers such as Jordan’s Furniture and Circle Furniture — expects pent-up demand at first, but then business will soften. He said some of the key factors that trigger sales are being upended by the virus, such as weddings, students moving into dorms, and house guests.

“It’s going to be a slow burn,” Savel said. “I don’t think I will see a real kick in the business until the end of the fourth quarter or the first quarter.”

The pace of restarting will be slower for many other industries.

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Health care and human services providers, which have also laid off about 100,000 employees, can begin high-priority preventative care, pediatric care, and treatment for high-risk patients and conditions now, but will have to wait for phase two — which will start no earlier than June 8 — to resume less-urgent preventative care and day programs.

The reeling food and lodging sector will be allowed to operate on a limited basis during phase two of the restart plan, and retailers may be able to open their doors. These sectors will be able to expand operations in phase three, when bars, casinos, gyms, and museums will also be permitted to reopen.

There is no timetable for nightclubs, sports arenas, and other large venues to restart.

The exact timing of the later phases isn’t known, and they could be delayed if a second wave of new COVID-19 cases emerges.

“But this still is an important milestone,” said Michael Goodman, an economist and professor of public policy at the University of Massachusetts Dartmouth. “It will move people off the unemployment rolls. And it will get construction projects and manufacturing moving again.”

Goodman said the pace and strength of the recovery will hinge on the confidence of businesses and consumers to resume normal routines.

“With permission to return, how many will? That’s an open question,” he said.

Auto dealer Herb Chambers shares that same sense of uncertainty.

Dealerships have been able to continue to sell and service cars, but their showrooms won’t be able to reopen until the second phase.

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Chambers said the high unemployment rate worries him, because it’s likely to make some people hold off on car purchases.

“Most people don’t need a new vehicle. They want one,” he said.

He projects that 70 to 80 percent of his auto sales will return by the fall, but a full recovery will probably be a year away.

“We hope it will be tomorrow. It’s not going to be tomorrow,” Chambers said.

Economists said the recovery may also be pushed back by the dire financial straits of state and local governments. Municipalities have cut about 12,000 jobs, a small percentage of the total layoffs in the state so far.

On Monday, the Massachusetts Taxpayers Foundation revised downward its forecast for the state budget for the upcoming fiscal year, citing a higher-than-expected unemployment rate and slower-than-expected recovery. Foundation president Eileen McAnneny said the forecast was done before details of Baker’s plan were released, but the idea of a phased reopening was baked into its analysis.

McAnneny now expects the shutdown to raise the state unemployment rate to 22 percent by the end of June. She projects that 323,000 jobs will be recovered by June 2021, but employment is unlikely to return to pre-pandemic levels before 2024.

That will have a devastating effect on the state budget that goes into effect July 1, with revenues projected to fall by $6 billion, more than a third larger than the foundation’s forecast from just a month ago.

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“This might not be the last revised forecast we have to issue,” said McAnneny. “This is definitely a moving target.”

The US House of Representatives has approved another rescue package that includes some $1 trillion in aid for local governments, but GOP senators and President Trump are against the bill.

Bain Capital cochair Steve Pagliuca, who has advocated for a gradual reopening, applauded Baker’s plan, saying that after a cautious start, reopening could speed up if the public health data indicate the virus is well under control.

Still, Pagliuca does not anticipate the economy will fully return until a vaccine is available, which could be at least a year away. Restrictions on sectors dependent on social interaction, such as restaurants and movie theaters, may have to be in place for some time to keep the virus at bay.

“I would urge people to have patience,” he said.










Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd. Shirley Leung is a Business columnist. She can be reached at shirley.leung@globe.com.