Not to state the obvious but the economy is not doing well. If, when we first found out that COVID-19 was in our borders, we had done as experts recommended and had a comprehensive and aggressive testing and contact tracing program with federal direction and guidance, the economy would perhaps have fallen and then rebounded sharply with the V-curve the Trump administration is still hoping for.
But this did not happen. Instead of leadership and swift action, we got half measures and a president who downplayed the seriousness of catastrophic and deadly viral spread to disastrous consequences.
Even as states have attempted to reopen, July continued to see record numbers of unemployment claims filed, with the last two weeks totalling to over 1.4 million claims each week. The recently released economic numbers for the 2nd quarter show a 32.9% GDP contraction. Numbers not seen since 1947 and 4 times the amount of the GDP contraction during the height of the 2008 Great Recession. Analysts thought that the third quarter GDP numbers would see a quick bounce back, slightly offsetting the rapid decline of the 2nd quarter. However, given recent unemployment numbers and the continued mismanagement of the pandemic, it is looking like the economic forecast will continue to darken into the 3rd quarter instead of providing relief.
Now we face a fall and winter that promise to be worse than anything we’ve seen thus far, both public health wise and economically. The unemployment expansion and eviction moratorium have both also expired, leaving 40 million Americans vulnerable to eviction and 25 million without the ability to collect a livable income.
We are in an unprecedented situation right now. We have no real leadership, there is no serious collaborative effort to stop the spread of COVID, and we are approaching, or have already crossed, a point of no return.
What is going to happen?
The service industry will continue to be severely impacted, as will travel, manufacturing and all jobs that do not allow telework or ample social distancing. Unemployment will continue to rise and spending will go down. This in turn will fuel more unemployment and less spending, a vicious cycle that feeds into itself. And if you still have your job and don’t think this will affect you, think again. Other commodities will get more expensive due to supply chain disruption and the breakdown of services. For example, grocery store prices have already gone up, adding to growing concerns over food insecurity. And if the USPS goes under, we will all be paying significantly more for mail, to the point where it may be unaffordable to most people and your favorite small businesses.
Unfortunately, the only way out is through. We MUST do what it takes to get the virus under control. If we had instituted a lockdown in the spring, before the virus got a foothold, as painful as it might have temporarily been, we would be in a much better position for the fall and winter and a robust recovery would be much more likely.
Federal Reserve Chair Jerome Powell has repeatedly emphasized that the economy will not make a full recovery until COVID-19 is eradicated. Before we can begin to get back on our feet, we need a competent national response to defeat COVID-19, something that seems less and less likely with the current administration.
Yours in Strength,
The Take Back Control Team