While the President has continued to state that when the country reopens their will be an economic boom, economist disagree. We will have a long road ahead of us to recovery rather than the light switch approach Trump believes. Recently Mr. Trump has predicted that once the economy restarts, it will rocket itself out a deep recession and lead to an economic boom “perhaps like never before”. Will the economy recover from this deep recession – YES! However, Trump is exaggerating on the time it will take recover. I have had the opportunity to speak to several individuals that have followed the President addressing the economic recovery. The majority feel that once stay-at-home orders and restrictions are lifted the economy will bounce right back to where it was. This is a false hope which is detrimental the recovery process and for individuals/families to plan on the future economic wellbeing for themselves/family.
Historical data shows that after a period of recession the stock market rebounds, however, it does take time. Below is an example of the Dow Jones Industrial Average chart for the period 1895 to 2015 with shaded areas indicating US recessions.
We are all seeing and feeling the impact this virus is having on our lives, the US economy, and the world. Over the past couple months many States have issued stay-at-home orders only keeping essential businesses open. Many businesses are having to furlough employees during this time. Within four weeks after the President declared a national emergency more than 22 million people were unemployed. And that number continues to grow because of the massive influx of applications to unemployment agencies in each state. Estimates predict the unemployment rate could be around 20 percent due the coronavirus. Economist are agreeing that we are in a recession, with the disagreement on how deep and painful it will ultimately be.
Why is the immediate economic boom not possible that Trump is consistently stating? FACTS!!
The economic recovery isn’t based on just the stay-at-home order and other restrictions. There is also a human element from consumers and workers. Unemployed individuals will have limited resources to purchase goods and/or services. The unemployment rate will not immediately return to the pre-virus rate. People will remain to be afraid of contracting the coronavirus until a vaccine is created, which scientist state will take over a year to eighteen months most likely. Just because a restaurant opens back up doesn’t mean the level of business will return to the level prior to the virus. A company that reopens may not need to rehire all the people due to a decreased demand for their goods/services. With the concern of contracting the virus vacations may be postponed to a future date.
We know that some type of social distancing and precautions will need to be in place until a vaccine or cure is created. Therefore, our new normal will not be our old normal!
There is concern and disagreement on the path the US is taking on reopening the country. We all want to go back to work, see our friends and loved ones, and get back to normal activities. As Trump pushes Governor’s to reopen States we also hear Governor’s and Scientist discussing the need to increase testing. There is a need to both increase capacity of testing and supply of testing materials to effectively reopen their State safely. Dr. Fauci, Director of the National Institute of Allergy and Infectious Diseases and on the Presidents Coronavirus Task Force, warns Americans about returning to quickly to life as it was before the pandemic. During an interview on “Good Morning America” he addresses if States open up to early “It’s going to backfire, that’s the problem.”
Economist are also warning if we rush opening to quickly, without the safeguards to prevent a second wave of the outbreak, we would just be creating more economic damage.
The safeguards are necessary for us to start an economic recovery and to start moving back to a normal life.