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Pace of economic recovery could shape races in swing states

Federal data suggests the economic impact of the pandemic may last through November

The economic downturn from the coronavirus pandemic has hit some swing states with close electoral races harder than others, with federal data indicating damage that may linger through the November elections.

Across the country, unemployment rates have climbed, business formation has declined and a majority of businesses fear they may not recover. Michigan Democratic Sen. Gary Peters, who is running for reelection this fall, said the handling of the crisis will shape voter views at the ballot box.

“What everybody’s focused on is getting through the COVID-19 crisis,” Peters told CQ Roll Call. “So it’s certainly going to continue to be an issue in November.”

The worst-hit states include Peters’ Michigan as well as a handful of others with competitive elections for the House, Senate and White House. That includes Nevada, Georgia and Pennsylvania. All four of those states have seen one-quarter or more of the workforce apply for unemployment since February, including furloughed employees.

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In April, Michigan had an 18 percentage-point increase in its unemployment rate to more than 22 percent, according to Bureau of Labor Statistics data released May 22. Pennsylvania’s unemployment rate sat at 15.1 percent last month, and Ohio’s at 16.8 percent.

New business creation, a significant factor for producing new jobs, has also dived, according to Census Bureau data. Nationally, the creation of new businesses with a “high propensity” to hire employees has been down by 9 percent each week of the past two months compared with the same period in 2019. In Michigan, those numbers were worse — declining 26 percent relative to 2019 in the week ending May 16.

Congressional action

Peters and most other Democrats on Capitol Hill have pushed for more relief funds, including the $3 trillion package that the House passed earlier this month. The package contains funds supporting state and local governments as well as hospitals and businesses.

Senate Republicans and White House officials have urged a pause in new legislation. Sen. David Perdue, R-Ga., told CQ Roll Call that legislation beyond the early relief package, such as liability protections and continued support for the Paycheck Protection Program for small businesses, would instead be his highest priority for recovery in Georgia.

“The specifics are yet to be determined, but we’re hearing a lot from our constituents right now that cases are already being filed, and we gotta give them some help,” Perdue said.

The longer the economy takes to switch to a recovery phase, the greater the risk of creating additional damage. Heidi Shierholz, policy director at the Economic Policy Institute, said the crisis has disturbed the normal churn of new businesses being made while others die off. That means that companies are not creating new positions to help the millions of people who have lost jobs.

“You see people being laid off at the exact time new businesses are not being formed, so the chance of finding a new job goes way down,” Shierholz said.

The disconnect between the number of businesses created and jobs lost may extend how long the economy will take to bounce back, she said.

“The hope was that businesses would be able to just sort of turn the lights back on, bring people back and get them working,” Shierholz said. “Instead, we will have to do a big scramble and a much slower process where new businesses are formed to create jobs.”

[Small businesses expect long recovery from pandemic]

Senate Majority Leader Mitch McConnell told reporters Tuesday while home in Kentucky that he would not back the House measure but “there’s still a likelihood more [relief] will be needed.”

Unemployment in Kentucky climbed over 15 percent in April, according to BLS data. McConnell has embraced the “possibility” of extending aid to state and local governments, something Democrats have made a priority for months.

Political fallout

How lawmakers handle the economic recovery may have a major impact on this November’s elections, said Thomas Ivacko, who oversees the Michigan Public Policy Survey. He pointed out that Michigan’s government currently faces a deficit of several billion dollars that could drag the state’s recovery.

“There’s just an enormous challenge if the federal government does not bail out state or local governments,” Ivacko said.

Come November, Michigan is shaping up to be a major battleground state. Trump won the state in 2016, and Peters is one of two Democratic incumbents facing reelection from a state that Trump won. Sen. Doug Jones of Alabama is the other.

The Democratic Congressional Campaign Committee has invested heavily in some of these and other states. This week, it announced plans to spend more than $2 million in advertising in Michigan, specifically in the Detroit area, as well as another $2 million in Pennsylvania.

An April 22 Fox News poll in Michigan showed former Vice President Joe Biden leading Trump, 49 percent to 41 percent, in the state. The last Pennsylvania poll came May 1 from Republican firm Harper Polling, which showed Biden leading Trump 49-43.

“The big question is, if there is blame or resentment on economic matters, where is it going to be laid?” said Chris Borick, director of the Muhlenberg College Institute of Public Opinion. “Is it going to be laid on the president, which it often is? Is it going to be laid on the governor who made the initial decisions? Certainly this will be a part of the campaign this fall.”

Many other factors point to a close race in November, Borick said, and the policy and political positioning around the coronavirus could well determine the outcome. For instance, the virus has hit Philadelphia harder than the rest of the state, and Borick said the public health impact may have more heft in districts like Republican Rep. Brian Fitzpatrick’s in the Philadelphia suburbs than in Democratic Rep. Conor Lamb’s western district.

“In 2016, Trump won by a sliver, and I don’t think it has changed all that much since then,” Borick said. “We’re living through such a big thing right now, but it is going to be the small things that matter.”

Jennifer Shutt contributed to this report.

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