This article at E21 throws cold water on the notion of a quick recovery from the lockdowns:
At this point, a V-shaped recovery is basically a pipe dream. Individuals and businesses will undoubtedly be scarred by this unprecedented and catastrophic event. The best we can hope for now is the “swoosh†that’ll put us on a path to a steady, but slower, recovery. Just how fast we return to pre-crisis levels of employment and productivity will depend on the natural path of the pandemic, the timing of medical innovations like antivirals and vaccines, and the willingness of policymakers to continue to strategically deploy cash to bolster a flailing economy.
making the crucial points
To achieve a V-shaped recovery, we’d need to able to reopen the economy with similar haste.
and
Recent polling indicates that more than two-thirds of Americans are “somewhat†or “very†worried about becoming infected by the virus or having someone they know becoming infected.
Presently, from a statistical standpoint there are 5 chances in a 1,000 you’ll contract the disease and 3 chances in 10,000 that you’ll die from it. However, when you discount the New York City metro area, those odds decrease to 2 chances in a 1,000 and 1 chance in 10,000 and when you further discount the Boston and Washington, DC areas, it decreases even farther. How do you account for two-thirds of Americans being somewhat or very worried about becoming infected?
I guess that depends on the working definition of “somewhat”. I’m concerned enough that I think that taking measures to avoid contracting the disease like wearing a face mask in the grocery store, maintaining social distancing, washing my hands frequenty, and wearing gloves is prudent, if only to reassure others. I guess I would characterize my views on contracting the disease more as fatalistic than somewhat concerned. If, despite taking basic precautions, I die, I die. Everybody dies of something.
I remain baffled by the large number of people hereabouts, especially public employees, who won’t take basic precautions and yet will undoubtedly support the re-election of the present political leadership. I don’t think you can coherently have it both ways. Do they agree with the political leadership or disagree?
At this point and with the ongoing mixture of panic and denial, unless we’re incredibly lucky and a highly effective vaccine against the virus is produced in miraculously short order, I doubt the U. S. economy will be fully recovered in my lifetime. I think it could be if the form taken by future “stimulus” packages were more prudent and considered and less politically motivated, it would result in a faster recovery. We should also remember that we presently have good reason to believe that the higher the percentage of debt relative to GDP, the slower economic growth will be.
I generally agree with your assessment.
Here in Colorado, which is opening back up in many counties quicker than a lot of places, revenue for the state government is already projected to be 25% lower than expected. I think that on an objective basis, my state is one of the better states in terms of handling this crisis and also in terms of dealing with the economic realities (the program to fill the 25% budget gap was passed on a bipartisan basis out of the joint budget committee). The committee plan will cut just about everything. K-12 and higher education cut by at least 15%, state employment by 5-10%, cuts to Medicaid, which hospitals will end up eating out of their bottom lines. Transfers from the state government to local and municipal governments will decrease.
Colorado has TABOR, so the legislature cannot increase taxes, but they’re proposing to cancel property tax exemptions for the elderly and disabled veterans. Marijuana money and other funds programmed for specific purposes will be reprogrammed. The state is raiding our small rainy day fund and the unclaimed personal property fund. Those are the only options for raising revenue.
What will people think once these cuts become apparent and start reverberating and are “built-in” for the next several years? Because this giant hole in the state budget was caused by a giant hole in economic activity in the state – it doesn’t exist in isolation.
What will people think when their temporary job loss becomes permanent? When high unemployment stays high? When the economic effects cause permanent shifts in the patterns of business and economic activity that will take a long time to re-sort? There will undoubtedly be uneven effects and some communities will suffer more than others.
I think this will cause people’s risk profiles to change over time. I think there is an unwarranted amount of optimism that “this too shall pass” and that things will basically go back to normal in a month or two. I hope that is the case, but I fear it is not.
I’m worried about a feedback loop that creates an economic spiral towards a depression. I think to avoid that it will very very likely require not just Federal government action, but the right kind of action. But how likely is that? Covid has already divided partisans and ideologues along established lines and that won’t change. The Senate and Congress are still mired in the same disputes and are prioritizing their parochial interests and entrenched constituencies. Trump is Trump, constantly distracted by the latest shiny or slight to his fragile ego.
The more I look at this problem set, the more discouraged I am about the future.
Check out Michael Pettis twitter account.
He is doing an interesting “mood on the street†account of how the recovery is in China. I follow because China exited lockdown about two months before the US.
In short; the US is roughly where China was in mid March; in the early stages of exiting lockdown — everyone was pessimistic and fearful, stores opened with no customers, people still worked from home, etc. As the weeks went on, Pettis noticed commuting traffic recovered first; then restaurants; then this week noticed traffic in stores picking up.
Things may go differently in the US; but the mood by July 4th, Labor Day will be pretty different as the pandemic driven fear recedes.
I doubt that the mood will lift particularly quickly here. The reality of the measures we have put in place and will put in place to cope with the harm that the strategy for reducing the spread has done and will do will be harder to reverse than they were to implement and they will become increasingly difficult to implement.
I think we will start off slowly then pick up as long as we dont see a Covid rebound and have a brisk short term recovery. I think we are going to see some seasonal effect so we wont see a big rebound right away. It is the fall that worries me. If we see a big rebound I dont think states will be willing to lockdown again, until they actually look like NYC. Then it will be too late. I expect that a lot of rural areas will still be spared but those that do get hit will have almost no ability to cope. At that point people will self isolate anyway regardless of what the state does. (All this presupposes China recovers well so our supply chains will be intact again.)
Steve
I’m not convinced that there will even be COVID-19 around by the fall to cause a second wave. Apparently the case load in the UK is dropping to the point where Oxford University is worried that not enough of the 10K volunteers they are trying to round up for a field test of their experimental vaccine will get infected to provide trustworthy results. Time will tell.
I can’t see a V shaped recovery in the cards. Too much physical and monetary capital has been destroyed. L is for the doomsayers. U is nonsensical.
It will be a swoosh, but that’s not too informative unless you speculate on the slope of the upswing. It’s too early to tell. I don’t fear fetal position consumer reaction as much as others. The mortality statistics speak for themselves, but media and political hype have created fear. But this will pass rather rapidly in my opinion. Who is the consumer gonna believe, them or their lyin’ eyes?
The mortality statistics have real consequences as age advances. So inspecting the lifetime consumer spending cycle would be constructive. Further, rebound will be situational for different industry sectors. Leisure and hospitality could have a rough go. Big city renters? Ouch. Second and third tier city real estate – positive. And on and on. Let’s hope government stays out of the way and lets the transformational process work it’s way through.
As for the big W or second wave fans, I’m with Tars. That’s for the fear mongers, who have agendas. Everything I’ve seen says the virus is much more prevalent already than anyone wants to admit. FL, SC and GA do not have people waiting at hospital ERs….. The most vulnerable should take sensible precautions but people are getting the idea they have been sold a bill of goods.
Basically, it’s save, spend, spend, spend, save, spend, die.
We do in Chicago—gunshot wounds. 9 dead so far this weekend.
“We do in Chicago—gunshot wounds. 9 dead so far this weekend.â€
They must not have been wearing masks…….
A perfect example of my overall view. We are looking for safety in the wrong places.
I can tell you where not to look for it: Garfield Park, Austin, and Englewood.
“As for the big W or second wave fans, I’m with Tars. That’s for the fear mongers, who have agendas.”
Guess I should concede that since we have never, ever seen a fall reoccurrence of a respiratory disease that first occurred in there spring.
Steve