Recession lurks behind health crisis
A recession is coming, economists say, as coronavirus concerns and the corresponding massive public health response trigger shutdowns that will affect businesses nationwide for the foreseeable future.
JPMorgan said in a report the economy is staring at a “novel-global recession,” but noted also that it could be short-lived.
“Although the size of this disruption is expected to be large, it is not anticipated to last long,” JPMorgan analysts wrote.
Governments are implementing social-distancing measures across the world, the analysts noted.
“Italy is now in total lockdown and the U.S. and a wide range of other countries are restricting international air travel,” the analysts wrote. “A broad range of public events are now being canceled across the globe.”
Locally, Jon Hurst, president of the Retailers Association of Massachusetts, said the organization’s members are nervous about what’s going to happen in the short- and long-term.
“They’re thinking about their employees and their profitability, and whether customers will come back,” Hurst said.
The analysts with JPMorgan also cited the “markets spasm.” Monday was another rough day on Wall Street due to the coronavirus fallout as the Dow Jones Industrial Average tumbled nearly 3,000 points (13%), its largest point drop in history.
“Financial conditions are tightening rapidly as perceptions of credit quality across a wide range of asset classes is deteriorating and liquidity has dried up,” the analysts wrote.
Wells Fargo Securities said Monday it projects the U.S. economy will fall into a recession in the April-through-June quarter.
Joel Prakken, chief U.S. economist at IHS Markit, projects the economy will shrink at a 5.4% annualized rate during the quarter, which would be its worst performance since the depths of the Great Recession.
A significant part of the U.S. economy will be shut down because of all the social-distancing measures implemented in cities and states around the country, said Gary Hufbauer of the Washington, D.C.-based Peterson Institute for International Economics.
“It will have a ripple effect,” he said.
Hufbauer said the timing of the economic recovery depends on adding more testing for coronavirus, finding a treatment that cuts down on the disease’s mortality rate, and developing a vaccine.
President Trump said at a press conference Monday the U.S. “may be” headed toward a recession. He said his administration’s focus is on stemming the virus. Once the spread of the virus is stopped, Trump said he believes the U.S. economy will see a “tremendous, tremendous surge.”
State revenues are expected to drop, said Eileen McAnneny, president of the Massachusetts Taxpayers Foundation.
“Intuitively, we all know sales tax revenues will be down, income tax could be down,” she said. “We will be monitoring it closely.”
The state budget writers will likely have to revise their revenue estimates for the year, McAnneny said, adding, “We’ll be paying close attention to it.”