Recession is Here: How Long Will It Last?
When will the NBER Declare a Recession?
Will the NBER Declare Recession Before It's Over?
What's the Length?
Shape of the Recovery?
Comments welcome as usual.
Mike "Mish" Shedlock
When will the NBER Declare a Recession?
Will the NBER Declare Recession Before It's Over?
What's the Length?
Shape of the Recovery?
Comments welcome as usual.
Mike "Mish" Shedlock
There is no way to predict the answer to your question at this point. People are still in self-isolation. Business is closed down in many places. Stimulus has not been delivered. There is so little valid data. You may as well put the calendar for the next few years on the wall, put on a blindfold and throw a dart.
Gotta agree with Jojo, it's impossible to say for now. We still don't know what's going on in China and other countries like India and Russia are behind us on the curve, still ramping up along with many others. Even Japan is somehow behind us even though they had cases early on.
It also depends how long new cases stay high in the US and Europe, along with the possibility of an uptick after everything opens again. Too many variables still unknown.
Here's the problem. At some point we all have to go back to work, but there's no plan. Do we need to sit further apart at restaurants? Do workers need to be spaced further apart or have alternating groups of the work force work from home? Large stadium events will be a problem for the foreseeable future. All these things will reduce the spread of Covid-19 but restrict economic growth. I don't see the economy coming back until after a vaccine is released and deemed effective.
We all know recessions aren't declared until we have two quarters of economic contraction
I think we won't know until a vaccine, I agree. Recession, end of the year, we'll know more. I think it will start sometime, 2021 & last to 2023. But, it's still to early to tell.
I can see a U shaped recovery. I'm telecommuting. I miss doing stuff with my friends. I especially miss going out for lunch and beer on the weekends. Once it opens up, I think millions will be like me, eager to get out and have some fun.
How long the bottom of the U is is the question. And I think it is going to be longer than most people think. And it may be more of a W. Where the President demands everyone open up, they do, the virus explodes, and we shut back down again. Could be a horror story.
I'm hopeful for a vaccine within a year. They developed a preliminary vaccine for SARS1, which appeared to be successful in animal trials and early human trials, but the process collapsed when SARS1 infections collapsed.
The interesting question to me is how we go about the process of opening back up. You have to do it in a way that initially excludes the aged, and gives people confidence that they aren't walking into a charnel house of disease. You have to carefully manage expectations. You have to have strict regulations on sanitation at businesses for some period of time. Can the President and Congress (and our state and local leaders) get those details right? Because if they don't, tens of millions won't be going back out and spending money. Then the recovery becomes L shaped.
My concern is this thing goes away in June, the market goes berserk to 30k but Covid comes back out of nowhere in September even worse.
I am quite afraid this will mirror the 1918 Spanish Flu which killed far more in the Fall than in its initial appearance in the Spring. If so, the recovery of any shape will be strangled in the crib.
Eventually, we'll all be exposed and everyone will either be immune or dead. The recession will last until we reach that point.
Unfortunately the flu kills large numbers of elderly folks every year but not a peep from the media or government. If everyone sheltered in place, these deaths could be lessened. Coronavirus will continue to kill the elderly, even after the shutdown ends. But the pace of deaths will have been slowed, and hospitals more able to deal with it. The unfortunate WalMart workers featured in the news who died recently were obese, and likely had pre-existing conditions like diabetes, HBP, and heart disease. As long as demand remains, new businesses will replace failed businesses, but hopefully outsourcing to China will be re-examined and hopefully they will be presented with a huge reparations bill.
If there is one thing the "Just like the flu!" or even the "Not as bad as the flu!" crowds have brought to the surface (and I don't agree with either crowd) is the very thing you just mentioned, i.e. "Unfortunately the flu kills large numbers of elderly folks every year but not a peep from the media or government."
That complacency has started to strike me as the deliberate result of the kind of CBA that has been presented by those opposed to risking an economic shutdown to try to save lives from the COVID-19 pandemic.
With the "aging" of the population due to advances in healthcare, complacency over the flu starts to seem like a deliberate population control mechanism. Clear out the old from the "herd", make way for the young ...
With the "aging" of the population putting added strain on programs like Social Security, pensions, etc. complacency over the flu starts to seem like a deliberate budget control mechanism. Not that there seems to be much concern at all over budget deficits among the Keynesians that rule the world.
With the "aging" of the population putting added strain on the healthcare systems, complacency over the flu starts to seem like a deliberate healthcare cost control mechanism.
Something tells me that the complacency over the flu is soon enough going to be joined with complacency over COVID-19 ... so long as statistics confirm that it really is elderly folks who comprise the massive majority of deaths from the disease.
Just another "beneficial culling the herd of the weakest and most infirm and, of course, very costly" ... after all, with a person worth ~10 million dollars to the bean counters, it's not difficult to see that the elderly, who have ceased being "productive members of society" or whose "productivity has decreased significantly" are nothing but a big fat red negative in the societal CBA.
I suppose we are supposed to be very grateful for the sociopaths among us who see these issues so much more clearly than the rest of us ...
I'll offer a different perspective on recession odds and length.
Those forecasting a recovery do so based on the notion that things will resume normalcy immediately once we've bent the curve. That is wrong on two counts:
Bending the curve isn't permanent. Three weeks after people go back to work, assuming they even do, the curve will revert back to exponential growth. That will slam the newfound confidence that will inevitably be in place once the curve is bent.
Low income people, of which there are a great many in this country, will not recover from this shutdown. Here's some data that I've compiled from NC, where I live: I manage 130 units of low income property. All the units are occupied except 4. In the last month about 30 people living here have lost their jobs, and approximately 30 more are about to lose their jobs. That's a current unemployment rate for low income folks of 23% and, in a week, a likely rate of over 45%. Granted, low income folks are more likely to be laid off due to higher rates of hospitality work (restaurants\hotels etc).
Low income folks also spend 100% of everything they earn. I examine all of their financials at lease renewal time and very rarely do any of them save anything. Additionally, low income folks have stopped paying rent to me. That's alarming and is going to have repercussions for me. HUD has forbidden us to evict anyone for 4 months and the tenants are now aware of that. We cannot even charge a late fee. Many of my tenants are just now getting tax rebates, often in excess of 10k, and will be getting another 3k from the CARE act. About half my tenants, believe it or not, bought a newer model car in the last 2 months. They are completely unprepared for what is coming, both mentally and financially.
Crazy, isn't it? Yet that mentality during an almost certain recession is ongoing. People's actions are changing now, and there is much fear among my tenants. They aren't going to be the same people in 2 years that they are now. That's the problem with a short recession forecast: It doesn't consider the permanent change in behavior that will be ongoing. That will take time, lots of time, to correct.
Based on what I am seeing, I forecast a recession slightly worse than the 2008 recession, lasting just as long. We'll come out of it in 2022, once the virus slows down greatly. As long as most of us have not gotten the virus, we will remain in recession. Since this is likely a 2-3 year affair, and not a 2-3 month one, this will be a deep recession.
The recession wont be a v or u or even L. I couldnt find an alphabet character so I will use a clock face. It is going to be a 4 o’clock for at least 3 years.
Maybe in 2023 we will start the climb up again.
Yes there will be relief rallies over the next three years but the economic trend will be down. I hope I am wrong about all of this.
2 things are the deciding factors
How much employment returns, not everyone will have a job to go back to this year or next.
And a vaccine or treatment that gives confidence to people that they're not going to get sick, die or cause the death of someone else by returning to work and regular life.
I believe this will be a long process 2+ years before we see some stabilization, and a lot of jobs/economic activity are gone forever. It will be a different world in general.
An example is soon all stores will limit the amount of customers in to shop and so they will need less registers open. I saw this at Costco the other day, just 3 registers open and because of the low volume of shoppers it was just fine. Theres usually 8-10 registers open. They will not be doing as much business because of this much needed policy.
Until a treatment or vaccine comes along the amount of economic activity cannot return to anywhere close to where it was and that is ultimately the deciding factor.
The latest newspeak after "the new normal" is "The next two weeks will be our 9/11 or Pearl Harbor moment." Notice that 9/11 and Pearl Harbor were the START of wars. We are being prepped for extension of the state of emergency into the foreseeable future.
Goodbye civil rights, hello police state. Notice how organized religion and a large chunk small business were wiped out without an act of legislation or a single law being passed. Just an executive order will do now.
The unemployment rate does not even include the millions of self employed that have been put out of business and think, do to government and MSM equivocation, that they might go back to work next month. What do you think will happen when the foreclosures and evictions start coming by the tens of millions? Do you understand what happens when people are hungry, soon to be homeless and have nothing to do?
The entire economy will collapse because it is interdependent, and those parts that are not directly affected today by the suspension of civil rights and house arrest will lose their jobs over the next few months as spending declines. Not to mention the credit collapse. While people are not working and most everything has stopped, debt service continues unabated. Taxes do as well. I don't see the banksters or the government forgiving a nickle.
This situation will not continue without serious civil strife as more people lose their income, their homes and life's savings.
Working age people and children are at low risk of dying from C19. Let them go back to work and school, protect the elderly and get this over with. Trump keeps saying that he wants to get things opened up again so that the cure is not worse than the disease. I'm tending to agree. This cure clearly is. On the present course, we won't see prosperity again for a decade or more.
This could all change on a dime if a treatment or vaccine emerges, or it turns out that a large segment of the population has already contracted the virus and recovered. Let's hope.
And then again, there was the Weimar Republic.
SARS did not burn out. It is not as contagious and was controlled by contact tracing.
A vaccine...a vaccine will save us. Maybe. Maybe not. A product of the existing criminal infrastructure...do you really have that much trust? Bypass all 3 of the body's natural defense mechanisms and inject "whatever" into your body?
The reality is vaccine's are marginal and come with their own associated health risks and toxic components (aluminum, mercury, animal DNA/disease, etc).
Its really hard to be well and fight off sickness on a diet of processed pap. Even if you take your daily handful of pills (dirt components)...again marginally effective and outside of mineralizing the sewage system...not a replacement for mineral and enzyme deficient processed pap.
Plants turn dirt into absorbable components. Animals and humans do far better on plants (and animals...sorry PETA - people eating tasty animals)...than they do on eating dirt.
That leaves us with upending the current medical and agricultural systems (and everything associated)...and redirecting our attention and resources to a real cure. Which vastly upsets the current paradigm...and all those who profit from it. That is the war to be fought.
The Fed will save us as usual. They are buying stocks behind the scenes now. Wait till they buy stocks openly.
Also MMT has arrived.
The FT Says It’s Time for the Bank of England to Start Direct Funding of the Government. After the UK, it's the US.
Recessions will never happen again.
V-shaped recovery followed by a bunch of WW's
Just like the number of cases.
If you thought one dramatic shutdown was bad for the economy, wait until it becomes obvious that there will be multiple cycles.
Too early to tell.
In a recession now zero doubt. Once All Clear sounded will be the tell. Does virus spike? How soon before the masses return to normal behavior?
Wall Street will likely ignore any economic numbers for March / April / likely May as "If not for virus, economy would be humming" and numbers will V - shape once economy opens back up. I have serious doubts about virus tamped down to degree that masses resume normalcy quickly. Economy will be in a slog for balance of year ... Wall Street will take note ... with hat in hand I'm sure.
Well he wants to get things opened up again. Damn the additional infections!
He may be a stable genius, but we are not horses.
"Will the NBER Declare Recession Before It's Over?"
Depends on how long the recession is. The 2001 recession lasted only 6 months. The 2008 recession lasted a year and a half. In 2008, the NBER had plenty of time to declare a recession before it was over.
If this had happened in 1980, pre-web, I think we'd be looking at a several-year depression. However, most of the production process sets have not atrophied this time, nor the workforce memory of how to use them.
Assuming a common sense approach to a restart is well underway by month-end, I see the worst kitchen sink quarter in history coming up for Q2, followed by progress in the second half...assuming this damned thing doesn't mutate and start killing in even greater numbers before the Bio-med folks can get it cornered.
My sense is that there could be a lot of pent up demand when the shut down is lifted and so there will be a lot of interest in going out - getting in restaurants, going to shows, shopping after being cooped up for a month and a half. And then we get a V shaped recovery. But what happens if the demand is not there because savings accounts are down and buyers hit the pause button before going out. Or out of work workers who were getting unemployment are not hired back as quickly. The local business realizes the business can run with fewer people, or simply can not come back because there is no working capital. Then may be a long L. The big guys will probably be fine - but here in Vermont worry about all the small businesses that are not rich.
In future, .gov will pick the winners and losers. The precedent is set. There will be Government Corporate Partnerships and Black Market Enterprises. Free markets are going extinct.
What if we have to do this again this Fall/Winter?
First: Recession or depression: I couldn’t care less about who declares it or when it is declared. That’s a meaningless game for those who like games. Trying to predict short term economic numbers (weekly, monthly, quarterly) is something I leave to others who care about the short term. It’s one of the main reasons I frequent this blog. I appreciate that Mish cares about short term numbers and I take them into consideration when formulating my long term projections.
Second: The reality is that all economies are taking a big hit from this black swan event that will have significant implications for decades. The number of businesses, both large and small, that will be crippled or bankrupted will be huge. The same goes for individuals. The gargantuan increase in debt, particularly government debt, will be a further drag on growth for decades to come.
Third: For many years I have commented here that growth would average roughly 2% in the previous decade, 1% during this decade, and zero going forward. This event has disrupted that forecast slightly. There is an even greater deal of uncertainty regarding short term quarterly growth numbers. However, if we take a guess at a drop in gdp of perhaps 10% for 2020, followed by an average of 1% for the rest of the decade, it would appear that we have now pulled forward the period of zero growth to this decade.
If you insist on describing the recovery as a letter: not W, not U, but L.
Regarding the posts today on the pandemic, I notice some new folks who are anti-vaccine, pro-It’s just a flu, pro- just open the economy and let the virus infect everyone.
By the way, I see Trump just removed the watchdog who was overseeing the distribution of 2 trillion $. I wonder why?
MLB and MLBPA are discussing, however unlikely, playing games in the beginning of this season with no fans and all games in AZ. All of AZ’s Spring Training facilities, in addition to Chase Field are within 90 miles of each other, while some Spring Training parks in Florida are as much as 220 miles apart.
https://www.foxsports.com/midwest/story ... ona-040620
The NHL is considering an August return with no fans in attendance:
https://www.cbc.ca/sports/nhl-late-summ ... -1.5523339
CBC sports nhl-late-summ - Canada's home for news, sports, lifestyle, comedy, arts, kids, music, original series & more.
Anda I do take your points but really even Iceland is only scratching the surface of testing
And whilst there seems to be an obsession with lockdowns the simple fact is that without one Sweden has not seen a mass explosion in cases vs other nearby nations
It’s easy to claim lockdown works, far far harder to fake that no lockdown makes no difference
This is the big one folks...
If you are speaking of a Pre-Coronavirus economy or level of standard of living, kiss that fucking bye-bye.
Reasons being, the debt to GDP ratio is so far out of skew that there is no recovery.
Just going back to 1900 will be a challenge.
This downturn will be a total change of lifestyle and survival.
The dollar will not collapse, at first, as it is the top currency now, but with BRICs and Japan turning away from the allure of the dollar and the FED turning it out like Battery Acid Crystal Meth in missouri (no caps for you) it will lead to hyperinflation followed by deflation of a scale never seen before.
Learn Barter NOW, as my Seneca-Cayuga Father use to say, "You can't eat gold".
The reason it is is referred to as a recession is that after the Great Depression TPTB decided to never again use the "D" word, the technical differences involving the 2 quarters rule and such came much later.
That is like the FED, change the terms. Just as the orange headed Asshole uses the term socialism in the pejorative sense against liberals, by definition it is The "reallocation of wealth" and that 1.5 trillion dollar tax break he, and bush did too (no caps rule) just redistributed it up the economic ladder and not down.
I don't read to much here about the fact that this latest FED fiasco is concerned with the trickle down rule (a term first used by LBJ) and not the largest stimulator of the economy, the 72% who spend most in the service sector.
The velocity money multiplier component is shit and has been for 20 years.
Reagan started the downfall by stimulating debt, or we can go back to Nixon and his gold fiasco or the 1913 Federal reserve act but it matters not. Point being we had plenty of opportunities to apply the handbrake and didn't.
The system is broke and the rules have changed.
It will lead to revolt.
Notice this time around TPTB knew they had to dish out some crumbs to the average, but extremely large, lower casts to ward off civil disruption, but this won't last forever.
Get Fucking use to it from here on out and expect new tricks by the Government and the FED to placate the lower casts, we don't do well in captivity, not after the second and third bailouts anyway.
Maybe they can use all that excess toilet paper in the public's hands (pun intended) to wipe all that currency off their collective asses, right after they confiscate it.
I'm checking my balls every day as that is the only thing they ain't got yet.
My frame for all of this is that we are now in asymmetric war between 'globalists' and 'nationalists' (to oversimplify). The globalists are part of the dominant paradigm the past fifty years or so and are embedded deep in most nations and especially of course global institutions. In the US some call it 'Deep State' but also many globalists are university professors, economists and far more.
China is the globalist manufacturing hub. Russia might be its defense hub. America is services and a great consumer market. UK might be intelligence still senior to US, but not sure. Etc. The main point is that they have separated the globe into mutually dependent blocks, so they have in some sense been already divided and conquered. The current situation with medicines being nearly all made in China being a front and center example.
After last trade deal, various Chinese generals were reported to have proclaimed that asymmetric war has been analysed, practiced and is coming because they will not let the US close them down or curtail their Belt & Road plan.
Well, Covid is the opening salvo in asymmetric war. Looks like HCQ has solved the problem, although the globalists in various Admin depts including CDC, FDA etc. are slow-walking everything they can, pushing the 'it won't get better until a vaccine in 12-18 months' line. They won't push HCQ because they are (globalist again) Big Pharma shills. Big corporations are behind globalists too of course because anything that can reduce power of nation state regulatory authorities is good - less red tape if there is one-size-fits-all regs and a corporation-friendly international court.
To be clear: the war isn't between China and the US (and their respective allies). It's between one system and a less structured one, in many ways similar to how Democrats generally line up with Big State/globalist patterns and Republicans are more into liberty, small government, community togetherness rather than the former's ideological uniformity.
So my prediction based on the above is that although in an ordinary world Trump might get some sort of V-bottom with more or less return to normal (with many weak players having been shaken out), but these are not normal times and the globalists have more than pandemics in their arsenal. IN a way they have studied what has happened with this one, learned much about various nations' strengths and weaknesses, and no doubt have already prepared the next move.
So there will be a second leg down, perhaps to 50% of the value reached at recent highs (stock market wise). Pension funds will be obliged to capitulate. Baby boomers may be, if not impoverished, greatly reduced. The goal is to bring down not only Trump himself, but representative Republics in their current form. They will continue to frame most US things through the lens of personalising everything around the vivid character of Trump; this has so far been a very successful way of distracting everyone from looking at what is really going on. So this will be all about Trump and if things go badly, replacing him will be the story, but really it will be about the Republic being that much closer to capitulation as such.
Some form of friendly totalitarian one-part (chinese model) governance managed mainly by experts (like Fauxi) will be pushed as current systems find themselves increasingly unable or unwilling to deal with whatever asymmetric war crap is thrown at them again and again until they surrender.
Could take years.
We are at war.
The first casualty of war is the truth.
The first BIG LIE with this one, is that we are not at war, rather dealing with a pathogen, that's all.
Can we call a spade a shovel on here?
This is not some candy ass recession we're looking at. This, at best will be a depression, lasting years.
At worst it will be the end of fiat currencies, enforced government crypto accounts and nanotech confirmable vaccines, along with other unforeseen restrictions on movement, financial activity and property ownership.