The coronavirus pandemic has thrown the US economy into a downturn, and almost certainly a recession. Economists are widely expecting this to be a short-lived phenomenon, and many hope for a V-shape recovery with a sudden upswing.
But what kind of recovery we’ll get will depend on just how long the downturn will last.
Social distancing policies are in full swing all around America. People who can are working from home. Businesses have shut down. Laid-off or furloughed employees are filing for unemployment assistance.
The longer this goes on, the more likely we have credit events, insolvency events…. This will take on a life of its own,” said Alicia Levine, chief strategist at BNY Mellon Investment Management on today’s market outlook call.
A two-month lockdown might allow for a V-shaped recovery. But a fourth-month lockdown would be exponentially worse, Levine said.
In the V-shape, we would get back to previous levels of growth in mid-2021,” said Liz Young, vice president at BNY Mellon Investment Management.
In a U-shaped recovery — which has a prolonged downturn, the economy would be “chugging along at the bottom” in 2021, Young said. It might not be a deep recession for the whole year, but unemployment levels and consumer spending would take longer to get back to where they were before.
All depends on how the next few weeks go.