Some experts predict the peak of the pandemic will hit later this month, and then there’ll be a steady decline in cases and deaths in the months thereafter. At some point later this year, hopefully, as many are predicting, the pandemic will be fully behind us.
But what will happen the day after the pandemic is officially over?
Thankfully, plans to open the economy are already in motion. According to economic adviser Larry Kudlow and Treasury Secretary Steve Mnuchin, the target date is four-to-eight weeks from now.
That sounds like a reasonable estimate. As of March 23, 2020, for example, Gates Foundation founder Bill Gates figured we could get back to normal in about six to 10 weeks, if “we do everything right.” Even if both estimates are off by a few weeks, it would be fantastic.
But as far as the near future is concerned, it still looks like an economic disaster lies before us.
Is the U.S. Government the Answer?
And even though the Trump administration’s first salvo of federal aid has been approved, a $2.4 trillion-dollar relief package, it has yet to materialize in the economy. Even the program’s $350 billion paycheck protection program has yet to reach small business owners, the backbone of the U.S. economy.
The longer the delay, the greater the impact of the economic lockdown.
Although additional multi-trillion-dollar aid packages have been mentioned as well, and will likely be proposed by Congress later in the year, those, too, may not be in time to stem the tide of the recession- or even depression-level trends.
Will Economy Crash 30 Percent—Or Rebound?
The delay in getting liquidity into the right areas of the economy is a big part of the challenge. That’s not to say that the massive money printing by the Federal Reserve is the way our economy is intended to operate, because it’s not. But that’s where we are, and where we have been since at least 2008.
Pretending that that’s not the case isn’t acknowledging reality.
But again, the longer it takes to get the economy working again, the worse the economy will be going forward. The resultant recession or depression could last at least for the next year or so, but potentially much longer.
In fact, economist Stephen Moore said that we could be “facing a potential Great Depression scenario” if the economy is not up and running by the beginning of May. But he’s not the only economist with dire forecasts for what may lie ahead of us.
Former Federal Reserve Chair Ben Bernanke said that the U.S. economy could shrink by 30 percent in the second quarter alone. Similarly, the current Federal Reserve Bank of St. Louis president has predicted a 30 percent unemployment rate this year.
That’s a worse scenario than the Great Depression.
What Jobs Will Be Lost?
Over just the past two weeks or so, 10 million Americans have lost their jobs. Even if the pandemic ended today, many of those jobs wouldn’t come back soon, if they came back at all. There are several reasons for this.
Employers who have either remained open or have just closed their doors have suffered significant financial losses. They’re operating, or will if they re-open, with fewer workers. That will last for months if not a year or more. For the time being, the days of 3 percent unemployment are behind us.
What’s more, the post-pandemic economy will look different to how it did before. Remote working may become a fixture for many industries. Gig workers may become an even larger part of the economy, while housing-related jobs may see a plunge in employment.
Will the Housing Market Recover?
In the first two months of 2020, the housing market was healthy. But by the week ending March 28, the number of newly listed properties fell by 34 percent year-over-year. Sellers just aren’t listing houses, and buyers aren’t eager to tour them during this pandemic.
Not surprisingly, the number of mortgage applications has dropped off as well, by 24 percent year-over-year.
Consumer confidence and a healthy labor market are major drivers of the housing market. Unfortunately, neither are present, nor look to be, in the coming months. The 2020 housing market will likely get worse going forward.
Federal Aid for Homeowners
That said, the federal government has put protections in place, including a 90-day moratorium for loans issued under Fannie Mae or Freddie Mac programs. The aim is to prevent Americans from losing their homes to foreclosure the way they did in the financial crisis of 2008–2009.
But with so many Americans potentially out of work for months going forward, there will be a reckoning in the housing market. Mortgage protections can’t last forever. Furthermore, high unemployment and lower incomes will likely persist much longer, since hiring in a recession is a slow process.
From that perspective, it’s difficult to see where the home buyers would be coming from to keep the market on an upward trend. Of course, as the number of buyers falls, demand falls, and so do prices. We don’t know how big of a market price adjustment that may trigger.
Some Jobs Will Return Faster Than Others
With the economy likely in an official recession by the end of June, employee salaries, many of which have already been reduced, may be slow to return to their prior levels. Some jobs, like the gig economy, that includes ridesharing, deliveries, and other service-oriented jobs, may return quicker.
But it may be some time before higher-paying jobs return in pre-pandemic numbers. Middle management jobs may remain fewer, as corporations will likely be running on leaner budgets, at least at first. And, as noted above, the housing industry, including construction and finance, may remain below pre-pandemic levels.
On the upside, the repatriation of supply chains from China is a high priority for the Trump administration. The initial focus is on the medical supply and pharmaceutical industries, as well as other strategic industries, such as rare earth metals, may come next. It’s estimated that up to 1.1 million jobs in the medical supply business alone will be created in the United States, adding $254 billion to the economy.
How quickly the U.S. economy recovers, whatever such a recovery may look like, may well depend on how quickly the repatriation efforts, as well as the relief programs, begin.
James Gorrie is a writer and speaker based in Southern California. He is the author of “The China Crisis.”
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.