According to one economist, the last six months of the U.S. economy has been “unprecedented,” the recovery will be “slow and fragile” and whomever wins the 2020 U.S. Presidential election needs to “step on the accelerator” to get consumers and businesses back in the black sooner than later.
These quotes and comments are even more important to consider when you learn the economist who said them is Mark Zandi, Chief Economist at Moody’s Analytics. Zandi spoke in early October about the upcoming election, economic impact of the coronavirus pandemic and what needs to happen next during a wide-ranging conversation with the Detroit Economic Club.
This was Zandi’s second visit to the Detroit Economic Club, which made his talk available to the media via a Zoom meeting. Zandi, who is widely considered an economic expert, said it was an interesting coincidence that this was his second conversation with the club.
“We were having the same debate as today about fiscal policy – it hasn’t changed one bit. (It’s) hard to believe,” Zandi told his Zoom-based audience.
Overall, Zandi said “it’s fair to say the last six months have been unprecedented,” especially when you consider the United States had a two-month recession in March and April because of the hard hits businesses and households had taken because of the coronavirus pandemic and related quarantines.
That is the shortest recession in U.S. economic history, Zandi noted. Most recessions last about nine months. But Zandi added that his 2020 recession was one of the most severe based on his calculations. Since March and April, the country has gained back half of its GDP losses and about half of its job losses – but that also “shows how far we have to go,” Zandi said.
He added that the policy response from the Federal Reserve and lawmakers has been unprecedented as well. But he believes the nation’s recovery needs a “foot on the accelerator for the most part” to get over the slow, “halting pace” of the recovery.
Zandi and CNN put together a Back-to-Normal Index, which included 40 or so economic indicators from government that looked at tried-and-true measures of economic activity, as well as third-party data. Zandi said that index showed big declines in March and April and then a bounce through late June. Since then, the economy has been “going sideways.”
Without additional fiscal support for households and businesses, “we may start to see negative (job numbers) by year’s end,” which is extremely problematic for the U.S. economy, Zandi said. He believes the nation needs a second, $1.85 trillion stimulus package – a happy medium between Democrats and Republicans.
Stimulus package needed
The lawmakers need to come together to create some kind of stimulus package for sure, Zandi said.
“Come on guys, let’s just do that,” Zandi said, noting that you cannot overdo economic help for people and businesses right now. The nation is so far from full employment that lawmakers need to pull out all the stops to get things going again, he noted.
Any new packages should include three things, Zandi said. First, there should be additional support to the unemployed and stressed households. He’s not a big fan of stimulus checks, but he noted that the systems are in place to do it again. Zandi also said there should be supplemental unemployment, perhaps in the neighborhood of $400 per person.
Secondly, state and local governments need help with budget holes, Zandi said. Without that federal support, you’re going to start to see job losses starting there soon. This will be a “direct hit to economy” if state and local governments do not receive this help. Finally, Zandi wants to see more help with support to industries like healthcare, airlines, retail and restaurants.
Without another stimulus, “it’s bad news. There’s no upside to that. It’s all downside,” Zandi said. “Why not just do it now and save us this pain and suffering?”
Zandi also said he believes the economic recovery is more K-shaped and he predicts former Vice President Joe Biden will win the U.S. Presidency in the upcoming election. He believes Biden will get the economy going faster, taking the country toward recovery sooner.
No matter who wins, Zandi said he believes it will be 2023 until the country gets back to full employment.
There’s been a bifurcation on different parts of the economy, and that’s the overall fallout of the pandemic, Zandi said. There’s been issues between how low-income versus higher-income households have done during the past seven months. The residential housing market is doing great but commercial real estate “is getting creamed,” Zandi said.