The Coronavirus Impact on the Economy

President Trump announced today at the White House press conference that he wants the US economy to get back on track as quickly as possible. When asked if this will be in lieu of fighting the virus and continuing social distancing as recommended by his medical staff, he stated that both measures are necessary and must happen in tandem. He also stated that it is essential to find a balance between fighting the pandemic and restoring the economy.

The President is correct. The economy needs to be restored quickly (in weeks rather than months) or the repercussions may be dire and difficult to recover from. The economic fallout has the potential to be worse than the pandemic itself due to the broader implications to more Americans. This is demonstrated by over 3 million people filing for unemployment insurance last week due to many parts of the economy being shut down. The number of people filing for unemployment is expected to soar to much higher numbers in the coming weeks, potentially reaching 20+ million new claims in the coming months.

Even if businesses start to function and start hiring again, assimilating 20+ million people back into the workforce will not happen overnight. It will many months up and up to several years. This means economic recovery will take time.

The critical path to getting the economy back on track is dependent on several key items:

1. Ubiquitous Covid 19 testing, available to as many people as possible, will help in assessing who has symptoms requiring treatment and who can get back to work.
2. Masks for healthcare workers. We need to protect our most critical frontline personnel.
3. Ventilators in hospitals. The more people we can support effectively in hospitals, the more people we can save as the virus continues to spread.
4. Success from potential drugs. If any of the drugs being repurposed from other treatments are deemed successful in treatment of the virus, this will be a major breakthrough allowing people to feel more confident about returning to work despite any potential risks.
5. Stimulus to small businesses beyond loans. Many small businesses are already laying off employees. While there is a promise to provide loans to small businesses so they can sustain during this crisis, the loans are not enough to keep many from shutting down or downsizing their employee count. With decreases in revenue for the foreseeable future, businesses will have a hard time obtaining loans and making payments while simultaneously affording to keep employees on payroll.
6. Stimulus for individuals and families. While the white house is stating that $3,000 will be made available to families of four in the upcoming bill, that amount doesn’t go very far for families in states like California and New York where expenses are much higher on a monthly basis. More will be required to keep families whole so they can “get back to normal” as quickly as possible.
7. Stimulus to large businesses, wall street and banks. The federal reserve is doing its part here, however the results have not been impactful yet. The new bill from Congress should also address this.

Conclusion: In order to get the economy back on track will require concerted effort and multiple things to go right in succession. Even if all goes well, the economy will likely sputter for a period of time before ramping back up due to the simple fact that it will take time for workers to get incorporated back into the workforce. While there must be a focused effort on restarting the economy, the fight against the virus must also persist with ongoing vigilance.

The fragility in the system is very real. So much can go wrong before things become right once again. But let’s be clear, things will never be normal ever again. In fact, a new normal is being redefined at this very moment.