The U.S. economy is deteriorating more quickly than was expected just days ago as extraordinary measures designed to curb the coronavirus keep 84 million Americans penned in their homes and cause the near-total shutdown of most businesses.
In a single 24-hour period, governors of three of the largest states — California, New York and Illinois — ordered residents to stay home except to buy food and medicine, while the governor of Pennsylvania ordered the closure of nonessential businesses. Across the globe, health officials are struggling to cope with the growing number of patients, with the World Health Organization noting that while it required three months to reach 100,000 cases, it took only 12 days to hit another 100,000.
The resulting economic meltdown, which is sending several million workers streaming into the unemployment line, is outpacing the federal government’s efforts to respond. As the Senate on Friday raced to complete work on a financial rescue package, the White House and key lawmakers were dramatically expanding its scope, pushing the legislation far beyond the original $1 trillion price tag.
With each day, an unprecedented stoppage gathers force as restaurants, movie theaters, sports arenas and offices close to shield themselves from the disease. Already, it is clear that the initial economic decline will be sharper and more painful than during the 2008 financial crisis.
Next week, the Labor Department will likely report that roughly 3 million Americans have filed first-time claims for unemployment assistance, more than four times the record high set in the depths of the 1982 recession, according to Bank of America Merrill Lynch. That is just the start of a surge that could send the jobless rate spiking to 20 percent from today’s 3.5 percent, a JPMorgan Chase economist told clients on a conference call Friday.
Estimates of the pandemic’s overall cost are staggering. Bridgewater Associates, a hedge fund manager, says the economy will shrink over the next three months at an annual rate of 30 percent. Goldman Sachs pegs the drop at 24 percent. JPMorgan Chase says 14 percent.
“We are looking at something quite grave,” said economist Janet L. Yellen, the former Federal Reserve chair. “If businesses suffer such serious losses and are forced to fire workers and have their firms go into bankruptcy, it may not be easy to pull out of that.”
Little more than seven months before the presidential election, President Trump already is looking past the crisis and promising a swift recovery. “We’re going to be a rocket ship as soon as this thing gets solved,” he said Thursday. “… We think it’s going to come back really fast.”
Most economists expect the economy to begin climbing out of its deep hole in the second half of this year. But those forecasts depend upon the pandemic being brought under control and the United States and other governments enacting policies that prevent lasting harm to factories and financial arteries. Even if all that happens, the economy will be smaller at the end of this year than it was at the beginning, according to Bridgewater, Goldman and JPMorgan.
The truth is no one knows what will happen months from now. No one on Wall Street or in Washington has any experience dealing with the kind of complex threat that has suddenly materialized to upend American life — a global health scare that is strangling the economy and disrupting financial markets.
Individual workers and their families — many only recently recovered from the economic cataclysm of 2008 and 2009 — are already feeling the effects. The unexpected economic shock has put millions of Americans living on the precipice of ruin. In a Fed survey last year, 39 percent of Americans said they would be unable to handle an unexpected $400 expense.
Lyndsy Hartmann knew something was wrong last weekend when she went to her job at a spa company in Charlottesville. Hartmann, 34, normally handles 150 calls a day from people interested in booking spa treatments and massages. But on Saturday and Sunday, she received a total of six.