President Donald Trump has repeatedly predicted a quick economic recovery once restrictions put in place to stem the spread of the coronavirus start to ease — a view that a number of economists say is overly optimistic given the devastating effect the pandemic has already had on businesses throughout the United States and the time it will take before all or most Americans can confidently resume normal life.
Weeks ago, as the coronavirus was spreading rapidly, most governors issued statewide stay-at-home orders and shuttered nearly all businesses. Jobs disappeared overnight — more than 16 million filed for unemployment in three weeks — and big banks telegraphed in first-quarter earnings summaries that a nasty recession was on the horizon as the economy was thrust into a downward spiral.
But pointing to the stock market’s brief surge during a Tuesday news briefing at the White House, Trump said investors “have a lot of confidence that we’re doing the right thing and that our country is going to be open soon and our country is going to be booming.”
“Just a little bit more than a month ago, we set every record you could set,” the president continued, referring to record-low unemployment numbers and stock market highs that have since been wiped out by the pandemic. “And I think we’re going to top those records, OK? And I think we’re going to top them soon, once we get rid of the invisible enemy, which will happen.”
Larry Kudlow, Trump’s top economic adviser, and Secretary of the Treasury Steven Mnuchin have made similar claims that the country’s economy would rapidly bounce back to continue its once-upward trajectory.
But economists and other key figures say that the recovery won’t be immediate, and that the repercussions of the pandemic will be felt for months and maybe years to come.
A team of economists from Northwestern University, Stanford University, the University of Chicago and Boston University published a National Bureau of Economic Research working paper Monday predicting the economy will shrink by nearly 11 percent by the end of the year.
One of the paper’s authors, Northwestern University’s Scott Baker, told NBC News that it will take “many quarters to years to get back to previous trends.”
“Certainly, I think the level of uncertainty that we’ve had so far, the level of economic dislocation, the costs that the government has been having to make up, and the forgone production by essentially shutting down a tremendous part of the world economy … lends itself to a slower recovery,” he said.
Baker added that the stock market’s recent optimism, fueled by indications that some of the hardest-hit states are getting the virus somewhat under control, suggests that the country might not see the team’s most dire predictions — a nearly 20 percent contraction of the economy longterm — come to fruition.
Still, the economy isn’t likely to snap back the minute businesses start opening back up. Many corporations will hold on to capital and decline to invest in their businesses for fear of a second crisis, Baker said, something that will be a second shock to the economy.
JPMorgan CEO Jamie Dimon predicted in a call with investors Tuesday that the economy wouldn’t open in May, but potentially in “June, July, August.” He said they’re expecting a recovery in the back half of the year — not a boom.
Dr. Atheendar Venkataramani, a physician and health economist at the University of Pennsylvania, said the country doesn’t yet have the kind of public health infrastructure — initial testing, contact tracing, medical personnel and eventually a vaccine — needed to jump-start the economy quickly.
“There’s a big scary virus out there and people may not want to engage in economic activity in the way that they normally would,” he said. “Until we can restore people’s confidence that we have the virus under control …it’s difficult for me to imagine that economic activity will return to normal.”
Anil Kashyap, an economics professor at the University of Chicago Booth School of Business, said it’s fair to say the economy won’t be booming by the end of the year.
“The economy’s in free fall right now. It’s hard to imagine that ceasing when the right thing for people to do is stay home,” he said. “I don’t think that there’s any chance that by the end of the year the level of GDP, the unemployment rate, any measure of well-being for the economy, is not going to be higher at the end of the year than it was at the beginning of the year, and certainly not higher than you would have predicted.”
He said the country can expect a recovery, but not an instantaneous one.
“At some point, things are going to turn around,” he said. “I’d be surprised at the end of the year if things weren’t improving — it’s just a question of how much.”