V? L? W? What form will economic recovery take? At FiveThirtyEight they polled macroeconomic researchers on the question and here’s what they learned:
Overall, the researchers predicted that although the economy will probably start to improve in the second half of this year, there won’t be a quick rally from this recession. “The panelists believe, on the whole, that the recovery from this crisis is going to be a very, very lengthy process,†Timmermann said. “We’re going to be seeing serious effects for years and years.â€
Our sample of economists thought it was more likely than not — with an average probability of 54 percent — that the next quarter to see positive real GDP growth in the U.S. (relative to the previous quarter) would be the third quarter of 2020. But that’s probably a low bar to clear; the economy shrunk by 4.8 percent in the first quarter and is likely to contract even more in the second quarter. And there’s a significant chance that the contractions could continue further into the future: The forecasters we polled thought there was a 23 percent chance that the economy would not grow again until the fourth quarter of 2020 and a 22 percent chance that it wouldn’t grow until the first quarter of 2021 or later.
“The economy almost has to grow [in the third quarter] because we’ll be starting from such a low base,†Wright said. “Unless, of course, things seem to be looking good right now and then in July or August there’s another wave and we go straight back to lockdown. Then you could have another negative quarter.â€
Another way to think about the recovery process is by considering the shape of the recession. We presented the economists with four specific options of how the trajectory of GDP might look as charted over 2020 and beyond: V-shaped, with a sharp fall and a sharp rebound; U-shaped, with a long period between the beginning of the recession and the recovery; W-shaped, with a sharp recovery followed by another sharp fall and recovery; or “Swooshâ€-shaped, with a sharp decline followed by a very slow recovery (picture the Nike logo). More than half of respondents — 58 percent — thought the long, slow recovery of a “Swoosh†shape was most likely, with 19 percent predicting a U-shape and 13 percent calling for a W-shape with multiple declines and recoveries. Tellingly, only 1 out of 31 economists forecasted a V-shape, which would see a quick recovery after the sharp decline of the past few months.
In some ways that’s a nightmare scenario for Democrats. Should the economy grow sharply in the third quarter of 2020, President Trump may be able to claim, truthfully, that his administration saw the fastest recorded growth ever. Being tagged as the lockdown party is risky. More on that in the next post.
Whatever the shape of the recovery, don’t expect things to get back to normal. Ever. The analogy I have been making is to driving into a tunnel. Right now we’re in the tunnel. When we emerge the landscape won’t be the same as it was on the other side of the tunnel. Additionally, there will be three very different styles or modes of business strategy: in the tunnel, exiting the tunnel, and outside the tunnel. Some, maybe even many businesses will never leave the tunnel.
They just gave numbers but would be interesting to see how much effect they think is from the lockdown vs the virus. We are having hotspots in individual cities so that likely affects the businesses hurt the most, like restaurants, hospitality and travel.
Steve
Oops, forgot.
https://www.wtvm.com/2020/05/26/montgomery-becomes-coronavirus-hotspot-cases-continue-rise/
“The forecasters we polled thought there was a 23 percent chance that the economy would not grow again until the fourth quarter of 2020…”
Gee, I had it at 24%……….
No one knows, except that all but one of these predictions will be wrong, things will be different in the future, and the recovery will vary widely by SIC. If you are a bicycle manufacturer business is fantastic. An airline components manufacturer not so much; it could be years. Best to get on with it and avoid the temptation to let experts dictate the path. The last thing we need is the Rhambo’s of the world, per your next post, telling the people in the trenches how to react.
We’ve never experienced such a universal lockdown scenario before now. So, IMO it’s ludicrous to reliably predict how it will be on the other side of this lockdown. How many businesses will disappear. How many new ones will emerge from the rubble, as a response to a reconfiguration of the marketplace? Also, terms like “new normal, social distancing†are part of the changing lexicon, and will forever more be influencing factors in molding the public reaction to any and all reopening efforts.
Lastly, there will definitely be a partisan layer to the virus aftermath, as democrats will be increasingly fixated on big government remedies, while conservatives will be even more unwilling to trust big government interference, as well as the information derived from “experts†and MSM sources.
To riff off of Jan………
That’s right. So how is it that the left seems so hell bent on shutdown? To what benefit? Is there any evidence?
No, there isn’t. Its political.
Risk averse.
Well the Greens have to love the results of the shutdowns. Traffic is way down, skies are clearing, wildlife returning to the cities.
All the social changes they wanted to achieve through taxation suddenly imposed by the virus.
Continuing the shutdown pleases their activist base.
Making peace with China and continued operation of dirty industries there is the job Biden has auditioned for all his career.
“Risk averse.â€
If that’s a response to my comment, or Jan, not buying it. The Dems aren’t the party of pathetic wimps. Some may adopt pop attitudes. But it starts deeper. Perceived potential for political gain. Don’t let the thought leaders off the hook. Don’t be that guy.
“Risk averse.â€
If that’s a response to my comment, or Jan, not buying it. The Dems aren’t the party of pathetic wimps. Some may adopt pop attitudes. But it starts deeper. Perceived potential for political gain. Don’t let the thought leaders off the hook. Don’t be that guy.’
The Lockdown governors are all risk-averse. They are more terrified of being blamed for any COVID-19 deaths that would occur if lockdown were lifted than the deaths the lockdown causes. Which makes it a media-driven decision-making process. I don’t see why they are so risk-averse. The MSM will excuse any and all behavior by them as they are doing now. Look at Andrew Cuomo, who injected countless nursing homes with infected patients causing thousands to die. He’s a hero to the MSM, whereas DeSantis, who did his best to isolate the same type of facilities and their occupants from the disease, is an evil heartless bully who killed thousands of grannies.
I agree though that they are also using the lockdowns and COVID-19 for political gain. Why else would Pelosi introduce non-germane provisions like mail-in voting to her three billion HEROES bill? Anything that can be used to claw back the power that belonged to them is on the table.
“the deaths the lockdown causes.”
People throw that around a lot. Have any numbers on these deaths?
Steve
No, they’re the party of the upper middle class or at least part of it. There’s a lot of overlap there. They’re strongly predisposed to underestimate the risks of staying locked down and overestimate the risks of opening up. Those are the attitudes of people who haven’t lost their jobs and are still being paid.
Everything that any politician does is for political gain. But only the career apparatchiks think that everything is purely political. There are plenty of those among the Democrats, too, viz. the party leadership.
“Risk averse.â€
Risk averse with their voters. In every state where they are having slow openings that is what polls show voters prefer. In all of the states which opened quickly that was the preferred policy of the voters supporting that governor.
“they’re the party of the upper middle class or at least part of it.”
That’s 5%-10% of the population? You can make a much better case that it is the party of women. Health care issues fall disproportionately on the women in the family.
https://www.theatlantic.com/ideas/archive/2020/02/how-women-became-democratic-partisans/606274/
Steve