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Why a Coronavirus Recession Could Be Extra Painful: Its Suddenness Why a Coronavirus Recession Could Be Extra Painful: Its Suddenness
(3 days later)
Often, when the economy runs into trouble, it goes through a slow glide from good times to bad. Other times, it is more like a fast car slamming on the brakes.Often, when the economy runs into trouble, it goes through a slow glide from good times to bad. Other times, it is more like a fast car slamming on the brakes.
A potential coronavirus recession looks more and more like the second situation — and that has big implications for how painful a downturn would probably feel.A potential coronavirus recession looks more and more like the second situation — and that has big implications for how painful a downturn would probably feel.
February employment numbers released Friday morning made clear the strong pre-virus state of the economy. They showed an economy performing at a high level as recently as three weeks ago, the period covered by the survey on which those numbers are based.February employment numbers released Friday morning made clear the strong pre-virus state of the economy. They showed an economy performing at a high level as recently as three weeks ago, the period covered by the survey on which those numbers are based.
This implies that if the outbreak of a novel form of coronavirus spurs a recession, it will look quite different from some previous downturns. In the last two such episodes, there was a prolonged period when imbalances in the economy were correcting themselves before economic pain really started to bite.This implies that if the outbreak of a novel form of coronavirus spurs a recession, it will look quite different from some previous downturns. In the last two such episodes, there was a prolonged period when imbalances in the economy were correcting themselves before economic pain really started to bite.
The United States housing market peaked in mid-2006, and growth weakened throughout 2007 — but a recession didn’t begin until December 2007 and didn’t become severe until fall 2008. Similarly, the stock market peaked in March 2000, but a recession didn’t begin until spring 2001.The United States housing market peaked in mid-2006, and growth weakened throughout 2007 — but a recession didn’t begin until December 2007 and didn’t become severe until fall 2008. Similarly, the stock market peaked in March 2000, but a recession didn’t begin until spring 2001.
There is no recent U.S. parallel to going from our February condition — a remarkably low 3.5 percent unemployment rate, a robust 273,000 jobs added — to outright contraction within two or three months. But that is increasingly what financial markets and forecasters view as a serious risk.There is no recent U.S. parallel to going from our February condition — a remarkably low 3.5 percent unemployment rate, a robust 273,000 jobs added — to outright contraction within two or three months. But that is increasingly what financial markets and forecasters view as a serious risk.
It explains why the Federal Reserve enacted a surprise interest rate cut this week, despite no meaningful evidence in economic data of a slowdown. It is why yields on longer-term bonds have abruptly fallen to the lowest levels in history. (This implies that investors who were relatively optimistic at the start of the year now see a prolonged period of weak growth and very low inflation.)It explains why the Federal Reserve enacted a surprise interest rate cut this week, despite no meaningful evidence in economic data of a slowdown. It is why yields on longer-term bonds have abruptly fallen to the lowest levels in history. (This implies that investors who were relatively optimistic at the start of the year now see a prolonged period of weak growth and very low inflation.)
There is some positive news. The healthy pre-coronavirus state of the economy implies that there are no huge imbalances that the United States needs to work through to get to the other side, equivalent to the stock market bubble of 2000 or housing bubble of 2006. That opens the possibility for a rapid return to economic health once the virus is contained.There is some positive news. The healthy pre-coronavirus state of the economy implies that there are no huge imbalances that the United States needs to work through to get to the other side, equivalent to the stock market bubble of 2000 or housing bubble of 2006. That opens the possibility for a rapid return to economic health once the virus is contained.
The bad news is that it will make this downturn feel all the more abrupt, and leave individuals and companies less time to make adjustments in preparation.The bad news is that it will make this downturn feel all the more abrupt, and leave individuals and companies less time to make adjustments in preparation.
“Because it’s happening so quickly, we could get more of a shock factor,” said Michelle Meyer, head of U.S. economics at BofA Securities. “The speed of the shock is important and could result in a downturn feeding on itself more acutely.”“Because it’s happening so quickly, we could get more of a shock factor,” said Michelle Meyer, head of U.S. economics at BofA Securities. “The speed of the shock is important and could result in a downturn feeding on itself more acutely.”
Suppose you run a business in travel and tourism. As of mid-February, you were looking forward to a strong year. You might have hired and made capital investments accordingly, and willingly borrowed money to do so.Suppose you run a business in travel and tourism. As of mid-February, you were looking forward to a strong year. You might have hired and made capital investments accordingly, and willingly borrowed money to do so.
Now, with many people afraid to travel, that business might face a shortfall in revenue and the prospect of more severe layoffs, budget cuts and even debt defaults than it would have if the warning signs had been building for longer.Now, with many people afraid to travel, that business might face a shortfall in revenue and the prospect of more severe layoffs, budget cuts and even debt defaults than it would have if the warning signs had been building for longer.
Similarly, an American who was feeling confident about her job and enjoying a record-high stock market in mid-February might have made financial decisions premised on the continuation of good times — being willing to make big-ticket purchases, for example — that could leave her more vulnerable if she were furloughed or laid off because of business shutdowns.Similarly, an American who was feeling confident about her job and enjoying a record-high stock market in mid-February might have made financial decisions premised on the continuation of good times — being willing to make big-ticket purchases, for example — that could leave her more vulnerable if she were furloughed or laid off because of business shutdowns.
The abruptness in the change of outlook, in that sense, increases the odds that the coronavirus shock could ripple through other corners of the financial system and broader economy.The abruptness in the change of outlook, in that sense, increases the odds that the coronavirus shock could ripple through other corners of the financial system and broader economy.
For example, if the hypothetical travel company defaults on its debts, or the hypothetical individual falls behind on credit card payments, that could help fuel a pullback in all types of lending across the economy. A tightening of credit could in turn slow economic activity even among businesses and consumers not directly affected by the virus.For example, if the hypothetical travel company defaults on its debts, or the hypothetical individual falls behind on credit card payments, that could help fuel a pullback in all types of lending across the economy. A tightening of credit could in turn slow economic activity even among businesses and consumers not directly affected by the virus.
It’s not just travel. The price of oil has fallen by 33 percent in the last two months, including a drop of about 8 percent on Friday. There are likely to be oil producers carrying debt that was perfectly manageable when a barrel of West Texas Intermediate crude was $63 a barrel in early January, but that will be suspending production and at risk of bankruptcy when it’s $42 a barrel.It’s not just travel. The price of oil has fallen by 33 percent in the last two months, including a drop of about 8 percent on Friday. There are likely to be oil producers carrying debt that was perfectly manageable when a barrel of West Texas Intermediate crude was $63 a barrel in early January, but that will be suspending production and at risk of bankruptcy when it’s $42 a barrel.
These sorts of ripples are hard to predict, but they are what economists are increasingly starting to fear — and are priced into the absurdly low longer-term interest rates evident in the bond market.These sorts of ripples are hard to predict, but they are what economists are increasingly starting to fear — and are priced into the absurdly low longer-term interest rates evident in the bond market.
Updated June 12, 2020Updated June 12, 2020
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
“If you look at the violent moves we’ve seen in markets, it doesn’t look like we’re heading for a slow, gradual slowdown,” said Lydia Boussour, senior U.S. economist at Oxford Economics. “It’s a very pervasive risk, it’s evolving fast, and it’s not just a one-off shock. It’s at risk of propagating throughout the economy.”“If you look at the violent moves we’ve seen in markets, it doesn’t look like we’re heading for a slow, gradual slowdown,” said Lydia Boussour, senior U.S. economist at Oxford Economics. “It’s a very pervasive risk, it’s evolving fast, and it’s not just a one-off shock. It’s at risk of propagating throughout the economy.”
The question for the economy in 2020 and beyond is whether coronavirus’s economic impact can really be walled off from the rest of the economy and financial system, resulting in a painful but short interlude.The question for the economy in 2020 and beyond is whether coronavirus’s economic impact can really be walled off from the rest of the economy and financial system, resulting in a painful but short interlude.
The shorter the impact, the easier it will be for the economy to go back to its (quite good) pre-virus functioning. Maybe the travel companies and oil companies and furloughed individuals will be back on their feet quickly enough that the damage doesn’t spread widely.The shorter the impact, the easier it will be for the economy to go back to its (quite good) pre-virus functioning. Maybe the travel companies and oil companies and furloughed individuals will be back on their feet quickly enough that the damage doesn’t spread widely.
The alternative is that it sets off economic ripples that will affect the world for a long time to come.The alternative is that it sets off economic ripples that will affect the world for a long time to come.
If there is nothing fundamentally wrong with how the economy is structured, after all, a return to the status quo should be perfectly plausible.If there is nothing fundamentally wrong with how the economy is structured, after all, a return to the status quo should be perfectly plausible.
But as every driver knows, coming to a sudden stop is stressful and painful, and can do a lot of damage that a gradual slowdown wouldn’t.But as every driver knows, coming to a sudden stop is stressful and painful, and can do a lot of damage that a gradual slowdown wouldn’t.