There’s no getting around the fact that the economic numbers for the foreseeable future are going to be the stuff of nightmares. The U.S. unemployment rate for March was “only” 4.4 percent, but that’s only catching the first tip of the coronavirus-driven layoffs. Most experts believe that by now it’s probably 10 percent and perhaps even significantly higher.
The oddity is that there’s really just one gargantuan problem facing our economy: Nobody can leave their houses to spend money on much except groceries and health care. If, tomorrow, the coronavirus disappeared and everyone could move and gather freely, the economy would instantly rebound. Americans would return to bars and restaurants, book new travel plans, visit Disney World and other tourist destinations, go to the movies, and start attending conferences, concerts, and sporting events. Americans would start buying cars in large numbers again as they could visit showrooms, Boeing could go back to making airplanes, and General Electric could go back to making engines.
Businesses would feel more secure about future revenue and re-authorize all of those new investments on hold.
We aren’t suffering from the usual problems that spur recessions. We didn’t have a tech or real-estate bubble burst, we didn’t suffer a disruption of oil supplies (quite the opposite, in fact), and the nation’s banks didn’t get overextended from making a series of reckless loans. Once the world solves the health problem, the economic problems will largely disappear. Bank of America is estimating the U.S. 2020 quarterly GDP will be a 7 percent decline in the first quarter, a 30 percent decline in the second quarter (gulp!), a one percent decline in the third quarter, and then a 30 percent surge in the fourth quarter. For perspective, the all-time high for U.S. GDP growth in one quarter was 16.70 percent in the first quarter of 1950. We are in the early stages of a catastrophic slide, with the promise of an unparalleled rebound at the end of this ordeal.
That said, just because many of our economic problems will disappear with a vaccine for the coronavirus doesn’t mean that we won’t be dealing with the repercussions for a long time. Most of the businesses that are forced to close by the disappearance of customers will not reopen. (In the months and years to come, credit agencies and lenders ought to realize that any business that collapsed in the spring of 2020 does not reflect any lack of good judgment or business acumen by the proprietor. Even the best businessman will be forced to shut his doors when government edicts prevent the customers from coming in.) Not every business will be quick to rehire, and laid-off Americans are spending their savings right now. All across America, people are halting their contributions to retirement and college savings. We may get back to “normal” economic conditions by 2021 — but we will have lost ground.