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Markets and Economy

Laying the Groundwork for an Economic Rebound

As the number of confirmed coronavirus cases rises and layoffs continue, hope arrives in the form of wide-ranging federal stimulus.

Key points:

  • Rapid developments in the fight against the virus mean that economic forecasts are uncertain.
  • Layoff reports show that a large portion of the economy has temporarily closed.
  • But the partial shutdown of the American economy is necessary to slow the spread of COVID-19. People are taking prevention seriously, which is a good thing.
  • The $2 trillion CARES Act should help businesses stay afloat until lockdowns end and lay the groundwork for a quick recovery.

Layoffs hit record highs last week and the number of confirmed novel coronavirus infections continued to climb in the US and other parts of the world. But despite the bad headlines, there are reasons for hope. The CARES Act will help keep the US economy in a holding pattern—laying the groundwork for a rapid rebound when the pandemic subsides.

A difficult March: The bleak economic data we’re seeing now is a window into the past two weeks.

  • The number of confirmed COVID-19 cases continues to rise; the US now has the highest number of cases in the world.
  • Given the disease’s long incubation period, most of the patients currently showing symptoms were likely infected earlier in the month, prior to widespread lockdown orders.
  • The rapid rise in confirmed cases is at least partially due to expanded testing capacity, rather than a surge of new infections.
  • A record 3.28 million workers filed for unemployment insurance during the third week of March as restaurants, retail shops and theaters shut down across the nation.
  • These layoffs reflect the pre-relief environment, when businesses were making staffing decisions without the guarantee of federal assistance.

The economy on hold: Federal relief legislation should blunt economic damage as many businesses are forced to temporarily close.

  • The $2.2 trillion federal CARES Act was signed into law March 27.
  • Once authorized funds begin moving through the pipeline, the legislation should help stem the tide of layoffs and keep consumer spending afloat.
  • The law’s $349 billion in business loans will cover expenses like rent, utilities and payroll for eight weeks.
  • Businesses that retain their staff during the shutdown will be well-positioned to rebound when the lockdowns end.
  • The act also expands unemployment insurance to cover laid off gig workers, increases benefit levels and provides direct cash payments to many households. This should support consumer spending during the crisis.
  • Layoffs may take some time to subside. Newly-covered gig workers are still seeing weak demand, and many small businesses will be forced to furlough workers until federal relief money is disbursed.

Watching the outbreak’s evolution: It’s too early to predict how the novel coronavirus outbreak and its economic impact will evolve. All we know for sure is that the situation is rapidly changing.

  • Social distancing may be working: real-time data gathered from 1 million Kinsa smart thermometers shows fever rates began falling sharply on March 20, following an atypical 10-day spike.
    • Kinsa’s data sample is large and geographically diverse. The temperature trends track closely against confirmed infections, revealing atypical fever clusters in known hotspots like New York City, Atlanta, Chicago and Washington State.
    • If the smart thermometer trends are accurate, the growth of confirmed COVID-19 cases may begin to taper in the coming weeks.

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman is the Managing Director and Head Economist for Commercial Banking. From regulations and technology to globalization and consumer habits, Jim's insights are used by companies and industries to help them better understand the changing economy and its impact on their businesses.

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