Joe Biden will likely spend much of the next four years trying to make up lost economic ground.

Though the economy has recovered from a large portion of the damage caused this spring by the pandemic and shutdowns, the process is incomplete. Many economists expect the next stages to be difficult. The economy is showing signs of slowing after the initial post-shutdown bounce, and recent history points to grinding recoveries, not quick bouncebacks.

The pandemic is also driving structural shifts in some industries that could permanently change how Americans spend and how companies do business—meaning dislocations for workers as the economy adjusts.

“We have gotten half of a bounce,” said Nicholas Bloom, a Stanford University economics professor. “The rest of it is probably going to take another two years or longer.”

That challenge will shape Mr. Biden’s presidency. The president-elect has plans for aggressive new spending programs on clean energy and infrastructure, ambitions to raise taxes on high-income households and a desire to increase regulation of energy and other sectors. But he faces difficult debates with Republicans about what fiscal policy would be effective in the unfinished recovery.

Since 1982—during administrations run by both Democrats and Republicans—it has taken an average of more than 46 months to claw back jobs lost during U.S. recessions. Before the 1980s it took on average less than half as long. After the 2007-09 downturn, it took more than six years to return to the jobs peak, well into President Obama’s second term.

This cycle is different because it started with an outside shock that shut the economy almost overnight, and then started reversing quickly as businesses reopened. The promise of a coronavirus vaccine could hasten recovery, but signs are building that the dynamics of more typical recessions are starting to take root, such as rising levels of long-term unemployment.

The jobless rate was 6.9% in September, down from 14.7% in April but still well above the historically low 3.5% rate reached in February. Employers cut 22 million jobs in the early months of the pandemic and have since added back 12 million.

In a Wall Street Journal survey of private-sector economists in October, more than half said the job market wouldn’t return to pre-recession levels until 2023 or later.

Mr. Biden has said getting Covid-19 under control is the first step toward economic recovery, and on Monday announced a task force to lay out a strategy for more federal action. “We’re still facing a very dark winter,” Mr. Biden said. “The challenge before us right now is still immense and growing.”

He supports additional payments to small businesses during the pandemic and additional aid to state and local governments.

He also plans to spend $2 trillion over four years on climate, infrastructure, health and other projects.

He also wants to raise taxes on corporations to 28% from 21% and increase taxes on households making more than $400,000 a year. The tax plan, to bring in more than $2 trillion over a decade, is meant to pay for expanded federal spending.

Mr. Biden “is going to have a very tough time enacting his spending wish list with a Republican Senate,” said Brian Riedl, a senior fellow at the right-leaning Manhattan Institute for Policy Research and a former Republican Senate staff member.

The party leadership won’t be known until January, after runoffs in Georgia Senate races.

Spending accelerated during Mr. Trump’s presidency, but lawmakers were at odds before the election over providing additional Covid-19 support to businesses, households and state and local governments. The federal government ran up a $3.1 trillion budget deficit in the fiscal year that ended Sept. 30, and Republicans were growing wary of adding to it.

The economy is showing signs of slowing after the initial post-shutdown bounce. Above, a closing sign in Boston last month.

The economy is showing signs of slowing after the initial post-shutdown bounce. Above, a closing sign in Boston last month.

Photo: Steven Senne/Associated Press

In the early years of recovery after the 2007-09 recession, fiscal policy was an economic restraint, despite a burst of spending and tax cuts in Mr. Obama’s first year in office. Budget agreements—negotiated largely between Kentucky Republican Mitch McConnell, the Senate majority leader then and now, and then-Vice President Biden—capped discretionary spending after 2010. As a share of gross domestic product, the budget deficit contracted from 2009 to 2015, which some economists say held back growth.

Some economists argue the federal government doesn’t need to worry about the added debt that comes with budget deficits now. That’s because servicing the debt is cheap while interest rates are very low. However, Mr. Riedl said, “the conditions are ripe for a spending backlash” in the Republican Party.

State and local governments also cut spending and raised taxes to repair their budgets after the shock of the 2007-09 recession, holding back the recovery.

This time, states came into the coronavirus crisis with large rainy-day funds, but the economic shock was also larger in some places. That portends a fiscal squeeze at state levels in 2021 and potentially beyond, which might inhibit the economy due to spending cuts, job reductions or tax increases.

“State and local governments are doing better than we might have expected, but it’s not over yet,” said Emily Raines, a Moody’s vice president who manages state credit ratings. Since March, state and local government payrolls are down 1.4 million, with state payrolls continuing to shrink even as the private sector rebounded.

For the economy, much will depend in the months ahead on the course of Covid-19, how quickly businesses and schools fully reopen and whether individuals return to old routines such as dining out, traveling on airplanes and attending movies.

States haven’t reimposed lockdowns in response to the most recent upsurge in virus cases, but Americans are showing signs of going out less anyway.
Apple Inc.
mobility data show that U.S. car trips are down 9% since the beginning of October as Covid cases rose, while public-transit travel was down 9% and walking trips were down 7%.

Google mobility data shows trips to retail stores and restaurants are dropping in states hit with rising virus cases since October, including Wisconsin, Iowa, North Dakota, South Dakota and Montana.

“If we don’t have control of the virus there is a high risk that the economy cannot fix itself,” said Austan Goolsbee, a University of Chicago Business School economics professor and former adviser to Mr. Obama. He said he worried that an uncontrollable new outbreak could create new stresses in financial markets and for small businesses that will lead to lasting economic damage.

If the virus gets under control, he said, there is a chance for a sharp economic snapback that defies the drawn-out recovery scenario common in other business cycles.

Economists point to an idea known as pent-up demand, money that people want to go out and spend given the chance. Households have been socking money away for months—on average about 20% of their after-tax income since April—leaving many prepared to spend.

News of vaccine progress could spur households and firms to start booking travel, vacation, and business investment, Torsten Slok, chief economist at
Apollo Global Management,
said in a note to clients Monday.

Still, other factors portend lingering effects from the pandemic and recession even after the virus is tamed.

Between April and October, the number of Americans saying they were out of work for 27 weeks or longer rose from 939,000 to 3.6 million, the highest level since 2014. Entire industries, including movie theaters, retailers, restaurants and airlines are reconsidering how they will operate in a post-pandemic world and how many workers they will need. That could involve the kind of long-term reshuffling of the job market that has characterized other recoveries in the modern era.

Recessions before the 1980s tended to be short-run events. The Federal Reserve typically raised interest rates to slow inflation and then quickly reduced rates, leading to short cycles in interest-sensitive sectors such as housing and auto production. Factories tended to shut only temporarily to adjust overstocked inventories, and then reopen, bringing back workers quickly from temporary layoff. On average in the 1950s through the 1970s, 10% of unemployed workers were out of work for more than six months. Most others were back to work quickly.

The share of long-term unemployment among those out of work doubled to 20% after the 1980s and hit 45% during the recovery from the last recession.

After the 2001 recession the technology industry and many large corporations went through deep shake outs when their profits fell, as did finance and housing industries after the 2007-09 recession. Business restructuring left workers out in the cold for long stretches. Moreover, waves of imports from China led to permanent shutdown of factories.

Recessions before the 1980s tended to be short-run events. Above, a 1974 unemployment line in Brooklyn.

Recessions before the 1980s tended to be short-run events. Above, a 1974 unemployment line in Brooklyn.

Photo: Allan Tannenbaum/Getty Images

Studio Movie Grill, a chain of 36 high-end movie theaters in 10 states including Texas, California, Georgia and Florida, isn’t going to come out of the current crisis the same as before, even if there is a speedier recovery from Covid-19, said Brian Schultz, the firm’s chairman. Viewers can eat meals while watching movies in its theaters.

In March, Mr. Schultz accelerated slow-moving plans to use technology more aggressively. He introduced a mobile phone app that allows customers to order tickets, reserve seats, choose food and pay their bills online. The technology reduced the need for person-to-person contact and serves a longstanding purpose: By increasing productivity, he’ll need fewer ticket takers, servers and other workers. That’s potentially good for efficiency and business but could create dislocation for some workers.

“The general guest will prefer self-service in a lot of aspects,” he said in an interview, pointing to convenience and safety.

That’s the bright side. For now the company is still in survival mode. It employed 7,200 workers before the crisis. It’s now down to between 350 and 400. Customers have been reluctant to gather, and Hollywood has been unwilling to release new movies to empty theaters. Last month, the company filed for chapter 11 bankruptcy protection. Survival for the industry, said Mr. Schultz, depends on getting immediate help from the federal government.

A Studio Movie Grill in Dallas last month.

A Studio Movie Grill in Dallas last month.

Photo: Dan Tian/Xinhua/Zuma Press

“Most movie theaters are operating between 5% and 10% of 2019 sales levels,” Mr. Schultz said. “In a high fixed-cost business like this, no one can sustain that for very long. There will be some assistance or the industry is going to become extinct.”

The RMR Group Inc.,
based in Newton, Mass, has a $32 billion portfolio of property holdings around the country. That includes more than 250 truck stops. Truck stop restaurants—a hallmark of the American road—weren’t a very profitable business before the crisis, said Adam Portnoy, the company’s chief executive officer.

Since the pandemic, the company is considering permanent changes. Some of RMR’s restaurants might not reopen, and resources could shift to its truck-stop fast-food stores, gas stations and convenience stores, which have come back to life after the initial shutdowns.

“Should we reopen all of these restaurants? Absent the pandemic, we never would have had those sorts of discussions,” he said. “We’ve never been in a situation where we closed them all.”

Inside a new office tower in New York City in September.

Inside a new office tower in New York City in September.

Photo: mike segar/Reuters

Mr. Bloom, the Stanford professor, said the shift toward working from home is another big structural change reshaping the economy. He has been surveying workers and businesses during the pandemic. Before the pandemic, Labor Department data show, workers on average spent roughly a dozen days a year working from home. After the pandemic, he estimates, it will be as much as 65 days.

The implications for the economy will be large and unevenly distributed, he said. For high-skill service workers unburdened of the daily commuting ritual, work from home will become a highly valuable perk, he said. For baristas, bus drivers or restaurant workers in city centers, he said, it could mean the loss of work.

The recovery could be what is known as K-shaped: Well-educated and well-off people and some businesses will rebound, while lower-wage workers with fewer credentials and some types of businesses, especially those tied to tourism and public gatherings, will bear long-term scars from the crisis.

The last expansion demonstrated that low-skill workers don’t fully benefit until the unemployment rate gets down to very low levels, when firms compete for labor by bidding up wages and seek out people often left behind to fill roles in the workforce. A long stretch of high unemployment could disproportionately hurt them.

“It is a very big inequality issue,” Mr. Bloom said.

Write to Jon Hilsenrath at