Saturday 16 May 2020

Day 61 of self-isolation - the USA economy

Will the USA economy bounce back?

There is an unspoken assumption that ending the lock down will quickly restore the economy.

I haven't seen any evidence for this, but there's good evidence against.

Certainly the politicians are quick to assert this, but politicians have always believed that they can end a recession by saying that it's ended.

In 1933, Roosevelt said "There is nothing to fear but fear itself". The Great Depression ended six years later, 10 years after it started.

During that time, unemployment in the USA was 15 to 20%. In 1939, for example, unemployment was still 15%, and it was only the stimulus of WW2 that finally brought full employment.

If the USA were to completely abolish all lock down rules (an insane possibility) then would people go back to work as normal? Some would. Many won't.

Some people won't go back to work, because their jobs have vanished. It will be a LONG time before air travel gets back to 2019 levels, before hotel occupancy goes back to normal (and people who own large numbers of hotels are FRANTIC to end the restrictions).

And 85% of people oppose reopening schools, so if schools reopen, will they send their kids to become infected? 86% of people agree with the stay-home order, so if it's suddenly lifted, they will still stay at home.

What is most valuable to you? Your children, and your health. Most people aren't stupid. The noisy minority will frolic in their reopened tattoo parlours, but the vast majority will avoid crowded places. No-one NEEDS to go to a restaurant, or a crowded beach, or a ball game. If the noisy minority are maskless, the sensible majority will avoid places where the maskless are.

The economy will not "immediately bounce back" as some politicians assert. 
The 2008 recession had a peak unemployment rate of 10%, getting back to a more normal level in 2016. Eight years.

The 1929 depression had a peak unemployment rate of 20%, and only returned to normal in 1939. Ten years.

In 2020, unemployment reached 15% and is still rising. If you think that it will bounce back to normal in 2021, then you just haven't looked at history.