Why the Economic Recovery Will Be More of a 'Swoosh' Than V-Shaped

[question everything]

Until recently, many policy makers and corporate executives were hoping for a V-shaped economic recovery from the coronavirus pandemic: a short, sharp collapse followed by a bounce back to pre-virus levels of activity. Now, however, they expect a “swoosh” recovery. Named after the Nike logo, it predicts a large drop followed by a painfully slow recovery, with many Western economies, including the U.S. and Europe, not back to 2019 levels of output until late next year—or beyond.



The sobering new view reflects the depth of the contraction now being recorded for the spring, as well as more evidence that soaring joblessness and months or years of social distancing—particularly in the West—will depress economic activity well into next year.

Airlines don’t expect passenger numbers to return to pre-coronavirus levels until 2022 at the earliest. Social distancing will make it harder to go to the movies, eat out or visit beauty salons until a vaccine is developed. Consumer goods companies anticipate that shoppers will switch to cheaper items and forgo splurges, likely remaining tightfisted long after lockdowns end. Some corporations have already announced fresh layoffs for the fall, prolonging the joblessness surge that has already left more than 30 million Americans unemployed.

Among the reasons for the darker outlook is that lockdowns are being eased more slowly than originally expected in some countries. Even when they do lift, some large-scale activities—such as concerts and professional sports—won’t be possible again for months. Retailers and restaurants that have reopened are allowing in fewer customers at a time due to social distancing. And consumers worried about infection risks may take a long time to return to their old habits.

According to a survey by market research group Coresight Research, more than 70% of Americans expect to avoid some public spaces after the lockdowns ease, with more than half saying they expect to stay away from shopping malls. Of those, almost a third expect to stay away for more than six months. In a separate Coresight poll, more than half of respondents plan to scale back on Christmas shopping. The possibility of the virus resurging in the fall or next winter has prompted some analysts to warn of potential setbacks, which could make even a “swoosh” recovery look jagged rather than smooth.

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https://www.wsj.com/articles/why-the-economic-recovery-will-be-more-of-a-swoosh-than-v-shaped-11589203608 (subscription)

[iemitsu]

1. Capitalist economies will not rebound

unless consumers have money to spend.
We need to quit giving our tax dollars to the rich and prop up those unemployed by the crisis.