There's been a recent flurry of articles suggesting that the economic recovery will not be V-shaped or quick.
Instead, the articles suggest it will likely take 2-3 years to fully recover from the pandemic induced recession.
For example, The Economist's April 30th cover story is called The 90% Economy because they think it will take a long time for the economy to get back to 100%.
Key quote:
Measures to control the virus while either keeping the economy running reasonably smoothly, as in South Korea, or reopening it, as in China, are associated with a GDP reduction in the region of 10%. That chimes with data which suggest that if Americans chose to avoid person-to-person proximity of the length of an arm or less, occupations worth approximately 10% of national output would become unviable.
The Financial Times article Life after lockdown: welcome to the empty-chair economy covers the same ground. Key quote:
But in most places, it will be anything but business-as-usual. Instead, the next few months are going to feel like an empty-chair economy, with new shift patterns at factories, half-full buses and trains, staggered opening hours and unusually roomy restaurants ... The once hoped-for V-shaped economic recovery now looks more like — at best — a stretched U, even if financial markets, supported by massive central bank firepower, have been on a tear.
And the New York Times article Why Economic Pain Could Persist Even After the Pandemic Is Contained points out"
In this downturn, there is the looming collapse of many small businesses; potential losses in the commercial real estate sectors; a crisis in the funding of state and local governments that will most likely take years to play out; and a collapse of energy prices that could slow capital investment.
Some sources are even more dire in their economic assessment. A recent study by economists at the University of Chicago suggests that 42 percent of recent layoffs will result in permanent job loss.
This would mean unemployment rates well above 10% could last for more than a year, which would meet most definitions of an economic depression.
Whatever happens, it seems clear the recovery will not be as fast as originally hoped.
We're in the process of updating our small business closure forecast from last month and will release the update in the near future.
But based on what we're seeing so far, we expect far more small business closures this year than occurred during the recession of 2008-2009.
