#recession #stimuluschecks #coronavirus
We recently asked the Yahoo Finance audience to submit questions about the coronavirus pandemic and the sharp recession it has suddenly caused. Here are answers to 29 of them:
How can you call it a recession when a recession is two consecutive quarters of negative growth? It’s true that’s the traditional notion of a recession. But the National Bureau of Economic Research, which identifies the beginning and end of recessions after the fact, now defines a recession this way: “A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” For what it’s worth, most forecasts do call for back-to-back declines in GDP in the first and second quarters of this year. And it’s clear from unemployment claims and other data that we’re undergoing a significant decline in economic activity.
Read more: What is a recession? Here are the basics
What’s the difference between a recession and a depression? There’s no formal definition for a depression, except it’s a severe version of a recession, as measured by the change in GDP. Real GDP fell nearly 30% from 1929 to 1933, the deepest trough of the Great Depression. During the “Great Recession” from 2007 to 2009, real GDP fell by just 4%. Economists think the decline in GDP this time around will be much closer to 4% than 30% – so, with luck, a recession rather than a depression. If you see terrifying forecasts of a 20% or 30% decline in GDP, these are probably annualized numbers, which can be misleading. Still, the current downturn is likely to be bad.
How long will it last? Way longer than anybody would like. It’s possible some of the many states with stay-at-home orders will begin to ease the rules by June, but they’ll likely do this very slowly, to reduce the odds of the virus resurging. Some closed businesses will never reopen and some laid-off employees will never go back to their old jobs. Moody’s Analytics predicts a “W-shaped” recovery with a rebound in activity as some businesses are able to open and rehire workers, followed by a slump as businesses and consumers hunker down. The development of a vaccine will trigger the second phase of a recovery, but Moody’s Analytics doesn’t foresee a full recovery until mid-2023.
Can there be a happy medium between keeping people safe but not having the economy continue to be hurt? This is exactly what governors calling the shots are trying to figure out, and there’s no playbook. There are obvious risks to sending people back into society without a vaccine, cure or treatment for the virus. But there are risks from closing businesses and interrupting workers’ livelihood, too. Governors will try to balance these risks by allowing the safest people to return to work first—young people and those who have survived the virus, developing immunity. Companies will probably space workers out more and perhaps require the use of gloves or masks. It’s also crucial to have widespread testing, to identify asymptomatic carriers of the virus and send them home before they can infect others. Either way, we’re likely to be living with more health and financial risk until a vaccine is widely available, in 2021, with luck.
Is coronavirus the sole cause of the recession? Pretty much. There were weaknesses in the U.S. economy before the virus hit, but we had solid 2% growth, a strong labor market and improving incomes. The virus shut down commerce in much of the world because it’s highly infectious and perhaps 10 times deadlier than the flu. Without treatment or a vaccine, the only way to stop the spread is to limit travel and human interaction, and impose strict distancing measures.
For more of this article and answers to the rest of viewers questions please visit:
Subscribe to Yahoo Finance:
About Yahoo Finance:
At Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life.
Connect with Yahoo Finance:
Get the latest news:
Find Yahoo Finance on Facebook:
Follow Yahoo Finance on Twitter:
Follow Yahoo Finance on Instagram:
0 Comments