Donald Trump’s dream that the U.S. economy will swiftly bounce back once America gets back to work following a nationwide shut down due to the COVID-19 pandemic, was dashed by economists speaking with the Wall Street Journal who said it will more likely be a long arduous climb that could take two years or more.
With the president and members of the Republican Party hoping and praying for a quick economic rebound that could salvage what might be a devastating November election for the GOP, analysts claim the so-called “V-shaped” return to economic health is likely out of the question.
“Until recently, many policy makers and corporate executives were hoping for a V-shaped economic recovery from the coronavirus pandemic: a short, sharp collapse followed by a bounce back to pre-virus levels of activity,” the Journal’s Paul Hannon and Saabira Chaudhuri wrote, describing the recovery to look more like a “swoosh” than a “V.”
“Named after the Nike logo, it predicts a large drop followed by a painfully slow recovery, with many Western economies, including the U.S. and Europe, not back to 2019 levels of output until late next year—or beyond,” the report continued, before adding, “The sobering new view reflects the depth of the contraction now being recorded for the spring, as well as more evidence that soaring joblessness and months or years of social distancing—particularly in the West—will depress economic activity well into next year.”
Despite expectations from the White House that consumers will bust out of their homes and go on buying sprees once released from lockdown and that the U.S will bounce back and have a “great year” in 2021, analysts predict the public will tip-toe back into the market and hang onto their money due to an uncertain future.
“Consumer goods companies anticipate that shoppers will switch to cheaper items and forgo splurges, likely remaining tightfisted long after lockdowns end. Some corporations have already announced fresh layoffs for the fall, prolonging the joblessness surge that has already left more than 30 million Americans unemployed,” the Journal reports.
Add to that lingering fears that the coronavirus could rear its head again, which will cause many to limit their going out in public, choosing to wait and see how things pan out.
“According to a survey by market research group Coresight Research, more than 70% of Americans expect to avoid some public spaces after the lockdowns ease, with more than half saying they expect to stay away from shopping malls. Of those, almost a third expect to stay away for more than six months,” the Journal reports before warning, “In a separate Coresight poll, more than half of respondents plan to scale back on Christmas shopping.”
Additionally, limitations on how retailers, concert venues and sports leagues conduct business in a social-distancing world, will likely depress income and cause financial strains that will trickle downward, affecting jobs that may already be lost never to return.
“All the scenarios we had that were V-shaped, we parked,” said Graeme Pitkethly, CFO at Unilever PLC. “We’re probably going through an extended period of living with Covid. It’s a fair bet that the global economy is going to be deeply challenged in the years ahead.”
You can read more here (subscription required).
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