The real damage of the coronavirus crisis has just started to emerge in the economy, and economists are urging the U.S. to brace for a prolonged period of pain, not a fast recovery.
When the economy does come back, it will roar back, one economist predicted. That’s little consolation for the shock that U.S. workers and business owners are enduring as home becomes school and workplace for those who are lucky enough to still have a job.
President Donald Trump’s latest expected date of reopening the economy is the end of April. “We have to get back to work,” he said in a Saturday briefing. But Trump is not an economist.
Here are some quotes from economists on when the U.S. economy will open.
How many people have the virus? How many people are immune? How effective will suppression measures be? The models cannot come close close to a precise answer on the big question looming over Americans’ lives and income.
To determine when to restart activity, “we need more information,” said R. Glenn Hubbard, a former top economist under President George W. Bush, in a New York Times report.
Two economists with the Conference Board mapped out three scenarios for the U.S. economy, ranging from a reboot in the coming months to a deep, long-lasting contraction. They wrote about it in a column for CNN. A New York City-based nonprofit, the Conference Board is a membership and research group organization that gives insights for what’s ahead, aka informed crystal-ball gazing.
“The likeliest scenario — specifically, for a situation where unemployment mushrooms to 15 percent — a record in modern American history — is the economy starts growing again by no earlier than September, and U.S. GDP for the year contracts by 6 percent,” wrote Bart van Ark (the organization’s executive vice president and global chief economist) and Erik Lundh (a senior economist).
“For context, in 2019 — when the economy was humming — GDP grew by 2.3 percent. If American businesses prepare for this long, grueling haul, they can emerge from the crisis stronger. Expecting a rapid recovery that doesn’t pan out would only cause more pain.”
If we know who has immunity, certain workers can begin returning to work. Testing is the best way to identify such workers, who may have had the virus without symptoms and never knew they were infected.
Without more testing, “there’s no way that you could set a time limit on when you could open up the economy,” said Simon Mongey, a University of Chicago economist. Mongey helped author a new study that found that rapid deployment of randomized testing for the virus could reduce its health and economic damage, the New York Times reported.
“It’s going to have to depend on being able to identify people that have the coronavirus, understanding how readily those people can transmit the disease to others and then kind of appropriately isolating people that are contagious,” Mongey said.
About 35 companies and research institutions are racing to create a vaccine. At least four have already started testing. One vaccine produced by Boston biotech firm Moderna is about to enter human trials, The Guardian reported. However, most vaccinologists agree a vaccine will not be ready before 18 months, said Annelies Wilder-Smith, professor of emerging infectious diseases at the London School of Hygiene and Tropical Medicine. That’s already extremely fast, and it assumes there will be no hitches, she said.
Here’s an economist’s take on a vaccine, from Project Syndicate: “Now that the U.S. has failed miserably to contain the outbreak despite having the world’s most advanced health system, Americans will find it exceedingly difficult to return to economic normalcy until a vaccine becomes widely available, which could be a year or more away,” said Kenneth Rogoff, professor of economics and public policy at Harvard University. Rogoff is former chief economist of the International Monetary Fund.
“It’s quite likely that we will need to figure out how to reopen the economy with the virus remaining a threat,” said Betsey Stevenson, a University of Michigan economist who worked for President Barack Obama on the White House Council of Economic Advisers.
Essential workers such as doctors, nurses, grocery store clerks and delivery drivers need more support, said Heather Boushey, the president of the Washington Center for Equitable Growth, a think tank focused on inequality. They need paid sick leave, adequate health insurance, access to coronavirus tests and affordable childcare while they work to stay healthy and to protect consumers against the virus spreading further.
“That is the economy at this point — those workers,” Boushey said, according to the New York Times. “And their health and safety is imperative to my safety.”
Business owners have blasted banks for their inefficient handling of the U.S. Treasury Department’s Paycheck Protection Program (PPP) which is part of the $2 trillion stimulus bill. Many applicants describe unnecessary roadblocks they are experiencing while trying to get loans. The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
Listen to GHOGH with Jamarlin Martin | Episode 70: Jamarlin Martin Jamarlin goes solo to discuss the COVID-19 crisis. He talks about the failed leadership of Trump, Andrew Cuomo, CDC Director Robert Redfield, Surgeon General Jerome Adams, and New York Mayor de Blasio.
The government’s efforts could be crucial to maintaining public support for the long shutdown, according to Adam Ozimek, chief economist at Upwork. Additional money for small business will be crucial throughout the crisis — both to prevent business failures and to keep owners and customers from defying the national effort to reduce infections.
“I don’t think you can force hundreds of thousands of small business owners to voluntarily shut down and let failure happen to them,” Ozimek said in an NYT report. “They won’t do it, the public won’t support it, and frankly I don’t think local authorities would stop them.”
Restarting economic activity too soon could risk a second wave of infections that could do more damage than the first because “it would shake people’s faith in their ability to engage in even limited amounts of shopping, dining or other commerce,” NYT reported.
“It’s important not to lift too early,” said Emil Verner, a Massachusetts Institute of Technology economist. Verner co-authored a new study that found that cities that took more aggressive steps to curb the 1918 U.S. flu pandemic emerged with stronger economies than cities that did less. “Because if we lift too early, the pandemic can take hold again. And that itself is very bad for the economy.”
