May 9, 2020 3 min read

Mekael Teshome was in his wheelhouse Thursday morning, discussing the national economy. He is an official with the Pittsburgh Branch of the Federal Reserve Bank of Cleveland.

Yet, throughout his half-hour discourse, he was careful to temper his projections of our financial well being – because COVID-19 disrupts economies and much more.

“Forecasts are always a little uncertain, and it is truly uncertain now because of something beyond our control. It is unknown when we will have this virus under control and whether there will be additional outbreaks.”

Teshome was the featured speaker of the Washington County Chamber of Commerce’s weekly briefing. He is vice president and senior regional officer of the Pittsburgh Branch, working with stakeholders in Western Pennsylvania, Ohio, West Virginia’s northern panhandle and eastern Kentucky.

Because the virus has rocked the nation and its once-healthy economy since early March, Teshome said indicators point toward “double-digit contraction” in the Gross Domestic Product in the second quarter, following a 4.8% contraction in March. He envisions possible improvement during the third quarter, although “by the end of 2020, we’ll still likely be below the pre-pandemic activities.”

This is virus-pending, of course.

“The key is consumers, and consumption is two-thirds of the economy,” Teshome said, adding that even if restrictions are eased, “it’s hard to say whether consumers will go out. There’s a global dimension to this. Part of our economic activity depends on how economies recover in the rest of the world.”

Teshome demurred when asked whether a manufacturing renaissance may eventually occur, similar to what evolved following the Great Recession more than a decade ago. “It’s still too early to say if that will occur. The pandemic has created supply chain disruptions. Factories may be reluctant to add capacity that would be in excess of demand. And there may be a labor issue. A lot of manufacturers say its hard to find a workforce.”

He said recovery of the national job market, again, hinges on the handling of COVID-19. Teshome anticipates April unemployment rates to be 15 to 20%, followed by a gradual decline that could lead to “single digits by the end of the year.”

Two issues facing workers, he added, is that “temporary layoffs could lead to permanent layoffs” and “the longer people are out of work, the harder it may be to get back into the workforce. Skills could decline.”

Teshome also spoke about the Main Street Lending Program, which the Federal Reserve has instituted but not yet launched. He said it is aimed more for mid-sized companies. They are four-year loans for $500,000 to $25 million, with principal and interest deferred the first year. They are not to be confused with Paycheck Protection Program grants.

Asked about lessons learned during the outbreak, Teshome said the biggest is that businesses must plan to be resilient in case the unexpected occurs. ‘Continuous planning and how to be flexible are keys.”