Just what kind of recession is the COVID-19 recession going to be?
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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
New COVID-19 cases and deaths in the U.S. are on the rise. How are Americans reacting?
Johns Hopkins University reports the seven-day average of new cases hit 68,767 on Sunday — a record — eclipsing the previous record hit in late July during the second, summer wave of infection. A funny thing is happening with consumers though: Even as COVID-19 cases rise, Americans don’t appear to be shying away from stepping indoors to shop or eat or exercise. Morning Consult asked consumers how comfortable they feel going out to eat, to the shopping mall or on a vacation. And their willingness has been rising. Surveys find consumers’ attitudes vary by age and income, and by political affiliation, said Chris Jackson, who heads up polling at Ipsos.
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
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