“Unemployment Rate Will Break Through 20%”
That’s what Joseph Brusuelas said this week. The Chief Economist at RSM US LLP explained that “The U.S. unemployment rate will break through 20% this spring and likely test the 1933 Depression-era high of 24.9% this year.”
With stimulus aid still not in everyone’s hands, the odds grow more in favor of further unemployment. Earlier this morning as the figures were released – just like in weeks prior – stocks actually jumped. Maybe the reason was that consecutive weeks of compounded unemployment numbers weren’t growing? Whatever the theory or justification behind that thought, the signs aren’t great for our current economic situation. As the International Monetary Fund puts it, the “Great Lockdown” could cause a ripple of problems still not unearthed.
The Great Lockdown
The International Monetary Fund predicted the “Great Lockdown” recession would be the steepest in almost a century. The group warned the world economy’s contraction and recovery would be worse than anticipated. That’s if the coronavirus lingers or returns.
It said output in both advanced and emerging markets would “understood” pre-virus trends through 2021. This would essentially destroy most lingering hopes of a V-shaped economic rebound. The cumulative loss in global GDP this year and next could be about $9 trillion. That’s bigger than the economies of Japan and Germany combined, IMF chief economist Gita Gopinath said.
“This is a crisis like no other, which means there is substantial uncertainty on the impact it will have on people’s lives and livelihoods.”IMF chief economist Gita Gopinath
As each week passes without a clear path to reopening the economy, things get worse. While U.S. President Trump continues to refute any statements against the “strongest economy in the world,” health officials remain very cautious on the next steps. What could be the worst case is if the economy reopens and the virus strengthens. Would we shut down again or attempt to weather what could become a very bad storm?
Is The Curve Flattening?
It’s tough to say if the curve is flattening in the U.S. or not. Earlier on Thursday, NY Governor Cuomo made a shocking announcement. The 606 new deaths in New York was the lowest figure in 10 days, but the governor said more progress against the virus was needed before he would lift restrictions. The NY Governor said that he would extend New York State’s shutdown to May 15, in coordination with other states.
“What happens after then? I don’t know,” Mr. Cuomo said of the May 15 extension. “We will see depending on what the data shows.”
Is this cautious optimism or does the public not know something the government does. It’s clear that the President, given the chance, would open the economy “tomorrow”. But health officials and states’ governors alike have strongly pushed against a knee-jerk restart of 2020. While cautiously optimistic, I’m still sifting through the clutter myself to see what other countries have done. Data out of China remains unclear, while Italy appears to have started seeing some daylight.