Why the Real Recession Has Yet to Come
On June 8, the National Bureau of Economic Research announced that the U.S. had officially entered a recession in February 2020. Yet, despite the statement, some economists argue that the “real” recession has yet to come.
The current U.S. economic situation doesn’t look too bad. With the exception of the unemployment rate, many core economic indicators have since started to recover from the arrival of COVID-19; housing and retail sales have shot up, and the stock market has almost returned to its pre-COVID-19 state. As a result, Steve Blitz, chief U.S. economist at TS Lombard, believes that the U.S. is not currently in a recession. However, he argues that the U.S. will enter a real recession “when the long-term repercussions of the current situation are felt.”
The repercussions that Blitz warns of refers to the fundamental changes that will ensue in the wake of the pandemic. With COVID-19 still prominent in major cities such as New York, Chicago, and Los Angeles, many people have moved to safer grounds. Thus, these cities that depend on the endless activity of their people will suffer immensely from the shift in consumer demand. Additionally, the service sector is predicted to take years to repair. Recent data from Yelp estimates that 60 percent of restaurants and bars will not open post-pandemic, with many other businesses predicted to experience significant structural changes.
Moreover, Blitz states that these fundamental changes will consequently affect the finance, employment, and wages of all Americans. Even scarier, these changes will be permanent and alter the U.S. economy forever.
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