Economic recovery from COVID-19 is underway; How strong will the bounce be?

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Over the past few days, I’ve had the chance to talk with some local folks about how they’ve been affected by the COVID-19/Wuhan virus lockdown. Those I spoke with say that financially, they’re doing pretty well, considering the unprecedented economic lockdown. One waitress was glad to be back to work and said unemployment benefits, plus an extra $600 per week, plus the federal stimulus check were more than enough to keep her family afloat. Others reported similar experiences.

Not to downplay anyone’s suffering, but considering the shock to the economy, I’m impressed it is doing as well as it is. Port traffic in Long Beach was up 9.5 percent in May, compared to May 2019. That’s the first increase of the year. The Federal Reserve indicated it will keep interest rates near zero, probably through 2022. A national survey of economists shows 23 percent think the economic recovery is already underway, while 68 think it will begin in the third quarter, which starts July 1. And unemployment claims continue to fall. I believe it is fair to say we have weathered the worst of this man-made economic downturn.

Christopher Thornberg, a UC Riverside professor and founding partner of Beacon Economics, is optimistic. He predicts “a strong, rapid recovery,” with unemployment falling to around 5 percent. Details on Beacon’s predictions are below.

For local businesses that are struggling and need help, San Bernardino County has created a one-stop shop for web-based information on protecting employees and financial assistance and other tools to help businesses. For details, click here https://wp.sbcounty.gov/workforce/business-services/resources-available/

Despite the tremendous economic costs of COVID-19 related closures, Beacon Economics‘ latest forecast for the U.S. and California continues to call for a strong, rapid recovery during the last half of 2020 – both for employment and output. Running counter to the of vast majority of forecasts, Beacon has been on record predicting a sharp second-half recovery for over two months. The new outlook, which is again rosier than most, is based on new data that indicate May’s numbers, once fully available, will be better than April’s.

“The pieces of data we see coming in for May suggest that the nation is already past the low point of economic activity and things are beginning to rebound,” said Christopher Thornberg, founding partner of Beacon Economics and one of the forecast authors. “Moreover, evidence continues to build that the third quarter will be even better and, despite dismal outlooks from many corners, we believe a “V” shaped recovery is already underway.” 

The new outlook is based on the assumption that health mandated closures and restrictions will continue to ease. The new forecast predicts the U.S. economy will reach close to pre-virus levels of production by the end of 2020 and unemployment will decline to the 5% range. “The 2020 coronavirus recession will be one of the sharpest, but shortest, on record,” said Thornberg. Additionally, most of the job losses in California have occurred in lower-paying sectors of the economy, which have a disproportionately low impact on the state’s revenue streams, according to the forecast. https://beaconecon.com/publications/beaconomics/