When the coronavirus began its unrelenting global assault, it became clear that the only way to protect American lives was to risk the American economy. As most of the country continues to run on essential services only, millions find themselves without jobs as the stock market bounces in uncertainty.
Diane Swonk, chief economist at Grant Thornton in Chicago, puts it bluntly: “There’s nowhere to hide. This is the deepest, fastest, most broad-based recession we’ve ever seen.”
Unemployment Rates Surge
Between mid-March and mid-April alone, more than 22 million unemployment claims were filed. That number dwarfs anything seen in the recent past.
“These are truly stunning statistics that tell you the severity of the situation,” said Torsten Slock, chief economist at Deutsche Bank Securities. “Let’s not forget we talked about 200,000 in jobless claims in January and February and now we are in the millions.” It took nearly ten years to create that many jobs after the 2008 recession, and the coronavirus snuffed them out virtually overnight.
Employees in the retail, restaurant, entertainment, and hospitality industries were hit hardest when stay-at-home orders forced their employers to shut down entirely. It’s devastating, but not entirely surprising, that the Commerce Department recently reported the steepest monthly drop in retail sales in 30 years. Best Buy, for example, furloughed 51,000 of its hourly store workers, including nearly all of its part-time staff.
Though President Trump is eager to reopen the economy and reverse the trend of unemployment, public health and safety create many obstacles.
Declaration of Recession
In mid-April, the International Monetary Fund (IMF) declared that the world is now facing its worst economic downturn since the Great Depression. In light of national lockdowns, shuttered stores and factories, widespread unemployment, and other dramatic economic changes, the IMF projects that the global economy will contract by 3 percent in 2020.
This is a complete turnaround from the IMF’s predictions earlier this year, when it believed the world economy was set to grow by 3.3 percent from 2019. It’s also a stark comparison to the recession of 2008-2009. Americans remember the devastating effects of the recession, but even then the world economy contracted by less than 1 percent. If a contraction of 3 percent does occur in 2020, it will be an unprecedented phenomenon.
“As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown,” explained Gita Gopinath, the I.M.F.’s chief economist. “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.”
The IMF also predicts that the United States economy will suffer more profoundly than the world as a whole. It projects that the American economy will contract by about 6 percent in 2020.
The bottom line? The impacts of coronavirus will sting, and they won’t disappear overnight. The economy can recover, but it will be a long, gradual process to reverse COVID-19’s impacts.
“My worry is that it will be a slow rollout, as it should be, which means a slow recovery,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “Turning on the U.S. economy isn’t like turning on a light bulb. It’s just too big.”