The states push forward in their phased reopenings, we’re getting clues that the beleaguered U. S economy might be on its way to recovery. Retail sales spiked by 17.7 percent in Mayand the unemployment rate unexpectedly dropped in that month, as well — suggesting that the Act of eventually returning to work and opening their wallets earlier than many expected. But experts still think that even if things are starting to look up now, we shouldn’t assume we’ll be back to normal anytime soon. In fact, economists think there are still significant economic risks despite the tentative rebound, including the one-second-wave-of-COVID-19, and an unwillingness to spend from consumers, and an absence of an additional tax from the stimulus the Congress.
In partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business, Genesis Brand, or the 34 quantitative macroeconomic economists what they thought about the variety of there is the likelihood that around-the-coronavirus recession-and-recovery efforts. The the most recent survey, which was conducted from June 19 through 22, which echoed many of the predictions from the last round though, that there were also a few new other aging problems in their forecasts.
When we the first, or think of the shape of the recovery, with 58 percent of respondents thought the trajectory of the future of the U.s. gross domestic product looked like Nike’s ” swoosh, the “swoosh” — a sharp downturn followed by a long, slow recovery. This time around, however, it is the consensus you have formed around a slightly different shape: on the reverse of the radical (i.e., a mirrored version of the the square-root symbol).
This shape — which for 73 percent of our economists predicted for the country”s economic future implies a steep drop followed by a quick split time and recovery for a longer period of slower, and mixed growth. But it isn’t do not have permission to an improvement over the swoosh. “There is nothing standard or smooth about this recovery,” said Lisa Cook, a professor of economics and international relations at Michigan State University. In her view, the reverse of radical-shaped recovery could be shaped by a spike in infections and hospitalizations, the wave of bankruptcies, the unemployment benefits expire, or consumers’ unwillingness to return to the gyms, nail salons or other parts of their routine. That could make the bounce back from this recession bumpier than previous recessions.
Twelve of the 17 economists who had predicted the swoosh, in our survey, in late May, changed to the reverse rotation of the radical in this time, leaving just five respondents sticking with the swoosh in this round of the survey. (And not the economist’s switched to the swoosh, another sign that the other patterns fit the trajectory of this economic recovery, the better.)
By now, the partial reopening of the us economy, along with the new unemployment and retail sales numbers, suggest a substantial bounce-back effect for the economy,” said Allan Timmermann, professor of finance and economics at the University of California, San Diego, california, who has been consulting with us on the design of the survey. “However, our panel is not convinced that this recovery will last, since they did not opt for the V-shaped recovery — in fact, it is interesting that not a single person opted for the V-shape.”
Overall, the surveyed group didn’t meaningfully vinnie on its projections for either the GDP or unemployment from the last time we asked. Nor did it change its long-term timeline for when the GDP might return to its pre-coronavirus benchmark. Maybe it’s encouraging that the projections haven’t gotten worse — but the panelists still think it’s unlikely (33 percent probability) that the GDP will creep back up to where it was in the fourth quarter of 2019 at the latest any time before the first half of the year 2022.
The Outlook of the GDP, does not have the t improved since the early Years
Consensus forecasts for when U.s. gross domestic product will return to its pre-coronavirus level, in each round of the survey
| The probability of success | |||
|---|---|---|---|
| THE TIME FRAME | Rd. 1 (may 25) | Rd. 2 (June 8) | Rd. 3 (June 22) |
| The First half of 2021 or earlier | 11% | 10% | 11% |
| The Second half of 2021 | 18 | 21 | 22 |
| The First half of the year 2022 | 18 | 23 | 22 |
| The Second half of the year 2022 | 21 | 22 | 22 |
| Later than the second half of the year 2022 | 33 | 25 | 24 |
In a new question in this round, we asked respondents what brazil might bring about their worst-case predictions for fourth-quarter GDP growth. Perhaps unsurprisingly, the average participant gave the most weight to the possibility of the second wave of the coronavirus later in the year. But their next-most-significant fears were economic in nature: whether consumers would be unwilling to spend even after the businesses open, and whether the Congress would choose not to pass further economic stimulus packages:
What might cause the worst-case scenario?
How much weight economists gave various scenarios when setting the lower bound of their GDP growth predictions for the fourth quarter of 2020
| Factor | Weight |
|---|---|
| The bad-second-wave-of-coronavirus-in-the-summer-or fall | 41.6% |
| The Public aversion to consumer spending even after the businesses reopen | 20.4 |
| The Decision by policymakers not to pass further fiscal stimulus | 19.0 |
| Weakness in the banking or financial system | 9.7 |
| Slower-than-expected development of coronavirus vaccine | 7.9 |
| The Other | 1.3 |
We also cannot understate the weirdness-of-these-economic-times. This led to a few of the other noteworthy results in our survey, starting with the very high projections for the the personal saving rate is the, which ballooned to a record 33 percent in April. In that metric, the saving is expressed as a share of disposable personal income.) Our group of economists doesn’t think it will, though, remove that high going forward, but the respondents did predict a mean saving rate of 20.2 percent in June, with an 80 percent confidence interval ranging from 13 percent on the low end to almost 29 percent on the high side. To put that in context: According to the data going back to 1959 from the Federal Reserve Bank of St. Louis, and the U. s. personal saving rate had never been higher than the 17.3 percent before the coronavirus, and had seldom gone into the double digits since the early 1990s.
Gloria Gonzalez-Rivera, professor of economics at the University of California, Riverside, told us that she didn’t think the saving, the June rate would match Ariovaldo’s simply because the Act had fewer opportunities to spend their money, at-the-height-of-the-state-level lockdowns. But she added that she still expected consumers to be “conservative” in June.
“A high savings rate is a sign that consumer confidence is low-spending, and is going to be low,” said Jonathan Wright, an economics professor at Johns Hopkins University, who, along with Timmermann, has been the guiding the design of the survey. “Spending My-is someone else’s income. So when people start to save a lot, that really slows down the recovery.”
The unusual nature of this recession also showed up in our respondents’ prediction for which the investments might not deliver the highest return over the rest of the year. As we wrote about last week, the stock market has been busy regaining most of its initial coronavirus-related losses since late March, even as the rest of the economy sits in a very tenuous place. Our panel generally thinks that the disconnect between the stock market and the broader economy will continue. When given the choice among the three investments, the panelists thought there was a 45 percent chance that the STOCK — with its heavy emphasis on tech stocks — would perform the best, followed by the S&P 500 is at 34 percent. The economists thought there was just a 21 percent chance that the 10-year U. S Treasury bonds, traditionally a safe haven in an environment of uncertainty and low corporate earnings, would provide the highest rate of return by the end of 2020.
Overall, the economists in our survey think the economy you have a long way to go before it returns to normal. Much of its path from here will hinge on the state of the virus itself, with additional emphasis on the government”s response. But the panel also sees one of the stranger features of this particular recession continuing to some degree — from-the-stock-market”s disconnect with the rest of the economy to the extraordinary level of personal savings by the Act. And of course, the error bars around the forecasts remain wide — as befits one of the most unpredictable economic moments in recent history.
