TAMPA, Fla. - The COVID-19 pandemic started as a public health crisis but has now morphed into an economic crisis and there is no clear end in sight.
This is definitely a recession, but are we headed for a depression? A recent report offers some predictions.
The six-page document is all about the post-COVID economy. It was released by UCLA’s Anderson Forecast, a research firm at the school that publishes quarterly outlooks about the economy.
However, these predictions do not paint a rosy picture.
“For the typical household that’s out there today, there’s definitely reason for concern, especially if your job was effected as a result of it,” said USF economist Chris Jones.
The economy started to plunge at the end of March. The unemployment rate skyrocketed from 3.5% and now sits around 11%. In addition, many small businesses are failing.
“That was the whole premise of the PPP program that was put forth by the federal government to keep these types of businesses afloat because as a result of the distancing they couldn’t stay profitable,” Jones said.
The essay’s author, David Shulman, predicts the national economy will not return to its pre-COVID levels until 2023, and that includes GDP and employment. According to him, this crisis is more than a recession, saying we have seen depression-like declines.
“We have to be really cautious when we use the term depression,” said Jones. “There actually is no macro-economic metric which tells you when a recession has become a depression.”
Jones believes to call a downturn a depression is not just based on how severe the impacts are, but also how long it goes on for -- and this model only forecasts for three years.
However, he says the report highlights many red flags happening in the economy, and the real impact will hinge on how long this pandemic lasts and if we see a second wave in the fall.
“If we do see that and these distancing measures have to continue in place through the fall and even into the holidays, all bets are off with regards to the depth of the contraction,” Jones said. “We’ll see job losses and business closures definitely at rates that we haven’t seen since the 1930s.”
The UCLA report does offer one bright spot, the housing market. Saying that despite high unemployment rates, right now consumer demand appears to be strong.