We appear to have reached the stage where just about everybody is terrified of what the coronavirus outbreak will do to the economy.
The Federal Reserve pulled the fire alarm this weekend, announcing that it would cut interest rates to near zero and take other emergency measures that it last used during the 2008 financial meltdown. The U.S. stock market responded to this news on Monday with its worst trading session since 1987, during which the S&P 500 plummeted by around 12 percent. Economists at the UCLA Anderson School of Management think the economy has already stopped growing, and will contract at a 6.5 percent rate next quarter (Goldman Sachs thinks 5 percent). Former White House economist Kevin Hassett, a relentless optimist if there ever was one, told CNN that the world faced close to a 100 percent chance of recession, and April could bring 1 milion job losses. Even President Trump momentarily lowered his reality distortion field and admitted the nation “may” be headed for recession. His former aide Gary Cohn thinks we’re probably at the start of one already.
One of the few people who does not appear to be particularly ruffled is Larry Kudlow, the former TV talking head who is now Trump’s top economic adviser. He told reporters that any downturn would be brief—a mere “weeks and months.” This is worrisome, since Kudlow is notoriously wrong about everything. He is the George Costanza of economic forecasters: Whatever the man predicts, it is safe to expect the opposite.
In other words, the conventional wisdom is absolutely correct: Everybody should be terrified about what’s coming. Our public health officials have no idea how long this crisis might last. But China just released a batch of data showing that the fight against COVID-19, which required mass lockdowns throughout the country, basically demolished its economy over the past several months. Here in the U.S., we’re already seeing early signs of the virus’ economic toll. On Saturday night, restaurants had 40 percent fewer diners compared a year before, according to OpenTable. And that was before New York City and Washington State closed all of theirs down. More than 12 million Americans work in restaurants, bars, and fast food. It’s not hard to see where all this is going. Our economy is headed into strange, fluish hibernation.