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COVID-19

Just what kind of recession is the COVID-19 recession going to be?

Marketplace Staff Mar 17, 2020
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People pass the New York Stock Exchange on March 16, when trading was halted for the third time in a week. Johannes Eisele/AFP via Getty Images
COVID-19

Just what kind of recession is the COVID-19 recession going to be?

Marketplace Staff Mar 17, 2020
People pass the New York Stock Exchange on March 16, when trading was halted for the third time in a week. Johannes Eisele/AFP via Getty Images
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President Donald Trump acknowledged Monday that the economy may be headed toward a recession as a result of the COVID-19 pandemic. Is this a virus-related recession, or is it the one economists said was on the horizon?

The recession that economists have been predicting was in part because we’ve been in the middle of the longest boom this economy’s ever seen.

“Whenever we’re in a boom, there’s an impending recession because we know that we experience business cycles in the U.S. economy,” said Andrea Eisfeldt, an economics professor at the UCLA Anderson School of Management.

Both economic booms and economic slowdowns come to an end eventually. Eisfeldt said that the recession we’re in now is “primarily being driven by the health shock that we’re experiencing.” 

Keep in mind that there are different types of recessions and recoveries. Unofficially, there are “V-shaped” and “L-shaped” recessions.

“When you think about a V-curve, it is exactly like you picture,” Eisfeldt said. “You have a fairly sharp drop, and then a fairly speedy recovery.”

An “L-shaped” recession is “an even steeper decline and a very prolonged recession,” she added. That’s basically how the Great Recession played out. The key to understanding the recession we’re headed into is understanding the difference between the “V” and “L” shapes.

“We do know some things about the deeper recessions,” Eisfeldt said. “Those recessions are the ones that seem to come along with credit events: corporate defaults, corporate bankruptcies, as well as layoffs.”

If you understand the difference, you know what to watch for.

In the last economic recession, Treasury Secretary Henry Paulson explained what it was going to take to calm things down. 

“If you’ve got a squirt gun in your pocket, you may have to take it out,” he said. “If you’ve got a bazooka, and people know you’ve got it, you’re not likely to take it out.”

The Trump administration announced its own version of a bazooka Tuesday. Almost a trillion dollars in stimulus, including direct cash payments to all Americans making less than $1 million annually.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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