Bad as the U.S. economy has been since Covid-19 struck, it’s going to get worse, reports Axios — and it will last a long time.
“Economists are warning that the economic downturn caused by the coronavirus pandemic is now creating another recession,” that will result in “mass job losses, business failures and declines in spending even in industries not directly impacted by the virus,” the news website says.
This looming “recession within a recession” will be “less severe than the coronavirus-driven downturn,” which was the worst since the Great Depression nearly a century ago.
“But it’s more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy,” Axios says.
Time is not on our side.
“The longer this weakness persists the harder it is to recover later on,” said Ernie Tedeschi of the investment banking and wealth management firm Evercore ISI.
As the recovery has slowed in recent weeks, economists have seen characteristics unique to the Covid recession mutate “to something that is much more in line with our historic experience with typical recessions,” Tedeschi told Axios.
The evidence, he said, includes a growing number of layoffs that are permanent rather than temporary; the increasing number of men who’ve lost jobs — “a traditional recession dynamic” — and the rising rate of long-term unemployment.
Many are urging Congress to enact a second stimulus package, but even limited negotiations are stalled, with Republicans and the White House blaming Democrats, and vice-versa.
Darius Dale, managing director of Hedgeye Risk Management, put it another way:
“Our view is that the U.S. economy is transitioning from a depression to a recession and not a recovery,” Dale said.
For most people, the recession-in-recession won’t be obvious despite its potential size and impact, since 2020’s 3rd quarter GDP growth is likely to be the highest ever. But that’s because it will represent a recovery from the 2nd quarater, which was “the worst downturn in history.”
Axios cites the conservative National Association for Business Economics, which recent polled its members; more than a third of them (37%) see an even chance of a “double-dip recession” that will mean an especially long recovery time — especially for lower-income Americans.