The recession is here
People are asking if the coronavirus will spark a downturn in the United States. It’s a question a lot of folks are asking.
I hate to break it to you, but the recession is already here.
Throughout America, most events that involve public gatherings have been nixed. Examples include major sporting events, industry conferences, parades, and special events.
Travel as we know it has basically shut down. Major companies have instructed employees to cancel business trips for the next thirty to sixty days.
Moreover, many corporate employees have been told to work from home. This means less money is being spent on gas and public transportation – and even the small incidentals, like that cup of coffee from Starbucks on the way into the workplace.
Theaters have shut down. Restaurants (the ones that are still open) have a fraction of customers walking through their doors. To make matters worse, there are some indications that disruptions in the supply chain may occur, meaning consumer staples may be subject to inflation.
The hard truth is the end of the decade long financial expansion is completely over. JP Morgan Chase believes the American economy may shrink by as much as 2% in the first quarter and 3% in the second. Personally, I think those numbers are conservative.
Layoffs are already happening and will continue to worsen. Much of our economy has been fueled by consumer spending. That simply isn’t happening right now because you can’t spend money on things that aren’t open and aren't for sale.
Moreover, employers aren’t going to pay employees salaries – or provide benefits – for work that isn't taking place.
Some believe the layoffs will be “temporary”. I’m sorry to tell you that this line of thinking is nothing more than wishful thinking. The earliest we will see things opening back up is May or June. Even when that happens, it will be at a reduced capacity and done in stages.
Mind you, we may see these closures happening for longer – well into the summer. Right now, we just don't know.
To minimize what is happening (and will only grow worse), U.S. lawmakers need to come up with a rescue plan right now for middle income workers.
That plan needs to include meaningful and substantive cash payments to American citizens. By this I mean $1000 to $1500 dollars for every man, woman and child. And these payments may need to occur several times in order to jumpstart spending once we get through the virus.
Payroll tax cuts do nothing to help the unemployed.
The Washington Center for Equitable Growth is suggesting immediate steps be put in place right now to help American workers and families. These steps are similar to what we saw during the Great Recession of 2007-2009.
The recession is here. We don’t have to wait for official reports to see this. Just look around.