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Seeing a Rapid Economic Recovery, and a Return to Business as Usual for the Vast Majority of Americans

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$CMCSA, $DIS

As nations struggle with fallout from the COVID-19 coronavirus chaos, many people are wondering when the recovery will begin and how it will look.

The Big Qs: Will it be slow and painful? A one-step-forward-two-steps-back process? Or a fast return to business as usual?

California economist Chris Thornberg, a founding partner with Beacon Economics, predicts a large and rapid “V” recovery.

In his Post COVID-19 analysis, he explains:

The 2nd quarter will definitely post record negatives, but that will be followed by record positives in the last half of the year as we quickly return to normalcy.”

Wednesday, the US Commerce Department reported that the economy shrank at a 4.8% annual rate in Q-1.

Mr. Thornberg predicts a 7.5% decliner in GDP growth in Q-2, a 6.2% increase in Q-3 and a 5% increase in Q-4. He cautioned that there could be some error on either side of the numbers because of the unknowns.

We know the 2nd quarter will have a historical decline, but it won’t be driven by economic problems, but rather by public health mandates,” he said in an interview Wednesday. “We have zero reasons to assume that somehow the economy will continue to underperform when the mandates are lifted.

Stay-at-home mandates have limited the spread of the virus, he said, but economists are far less certain of what the full economic shock will be, as economic statistics significantly lag public health numbers.

Southern California, like the rest of the country, has weathered the closure of all non-essential businesses, ranging from mom-and-pop operations to larger companies that are not deemed critical during the health emergency.

Schools and theme parks are closed, sporting and music events have been canceled or postponed and restaurants are closed to dine-in customers, although many are offering takeout and delivery service.

Wednesday, a Florida task force outlined preliminary plans for a phased reopening of Disney World and Universal Orlando. Phase 1 of the plan would cut attendance at the parks by 50% and a Phase 2 would boost that to 75%.

That matches recommendations by industry experts; guidelines some might expect to be applied to the reopening of Disneyland (NYSE:DIS), Universal Studios (NASDAQ:CMCSA) and other major Southern California attractions.

The chief economist at Moody’s Analytics (Private), said prospects for a recovery will depend on the availability of a coronavirus vaccine. He does not expect the economy to regain its footing on a sustained basis until mid-2021, assuming a vaccine is ready for use by then.

As to when stay-at-home mandates may be lifted, Mr. Thornberg notes the number of new coronavirus cases appears to have peaked in the US with California already seeing partial lifting of controls.

Hot spots could re-emerge in locations like NYC, he said, but government reaction to any new outbreaks will be “fast and fierce.”

In assessing the depth of the economic impacts, he said the obvious issues are with restaurants, hotels, airports, travel operations and a large portion of retail. But those closures, he said, account for less than 10% of US economic activity in a typical year.

In terms of government intervention, he notes an “unprecedented degree of public support” for businesses and workers who are being negatively impacted.

The current tally comes $2-T+ in government stimulus, which is enormous,” he said. “As the predicted declines are in the 10% range for the 2nd quarter, that amounts to a half-a-trillion dollar decline, give or take. A $2.3-T stimulus package is 4 times + the size of this calculated decline.”

Mr. Thornberg said the vast majority of people applying for unemployment are being laid off from profitable, sustainable businesses that have been shuttered temporarily as a result of public health mandates, and most will be called back.

Regardless of when things get better some habits may remain and new habits in the form of good health driven prevention will develop as the COVID-19 coronavirus chaos fades to Black.

Certainly, people will wash their hands more often and handshakes may become a thing of the past,” Mr. Thornberg said. “But will consumers stop going to ballgames and music festivals? Will they be too afraid to go to restaurants? This is not a new normal.”

American consumers are going to consume again very soon, it is in their DNA, and 2 months of benign Fear tactics will not change that!

Have a healthy day, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.