Are We Headed Into The Great Depression 2.0?
With five times the number of new coronavirus cases each day as there were last spring, shouldn’t the economy be going very hard south?
The economy crashed spectacularly last spring when the number of new COVID-19 cases approached 40k a day. GDP plunged at a rate previously unseen in American history. Millions of people lost their jobs overnight. Fast forward to today and the outlook is grim. CDC director Robert Redfield says the next few months will be the worst, with the number of American deaths potentially reaching half a million by the end of February.
Economists seem somehow oblivious to all this bleak news. Twenty-six of them polled by Consensus Economics predict the economy will grow at a rate of 3.1%-3.6% through the 1st quarter of 2021. Here’s the four reasons they think things may not turn out as bad as, by all rights, they should. Please let them be right.
ADAPTATION
Last spring, the economy fell further and faster than it did in the Great Depression—and then recovered in just a few months. Scholars believe that the shorter an economy is in the trough, the less “scarring” there is. While many, many businesses failed this year, companies innovated fast and entrepreneurs started new businesses at the highest rate in a decade.
VACCINES
Just knowing they’re coming prompts companies to plan for the future. Winter won’t be quite as bleak if we’re not expecting indefinite lockdowns. Goldman Sachs predicts sectors that have been very depressed—travel, hotel, food—to rebound sharply. BRB, gotta call my stockbroker.
STIMULUS
The whole house of cards relies on a major stimulus package coming through. Goldman assumes a trillion-dollar package before the presidential inauguration. JP Morgan also assumes a trillion-dollar package, but not until the end of the 1st quarter. Everyone assumes low interest rates will continue as far as the eye can see. Buyers? Sellers? Refinancers? This is you.
CLIMBING
The economy was flying high before the pandemic, and even after several months of rebounding, we’re nowhere near where we were a year ago. This means capital and labor are just sitting around waiting to be used, which is exactly what we plan to do, right? Who’s with me??
With a heavy heart for all who have suffered and lost so much, let’s raise a glass to health, happiness and prosperity in the new year.
Christy Rosen Clement is a Pricing Strategy Advisor®, Seller Representative Specialist®, Military Relocation Professional® and REALTOR® at Palermo Real Estate Professionals in South Tampa
