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Confused About the Economic Recovery? Here’s Why. | MyKCM

Confused About the Economic Recovery?

Here’s Why.

As we continue to work through the health crisis that plagues this country, more and more conversations are turning to economic recovery. While we look for signs that we’ve reached a plateau in cases of COVID-19, the concern and fear of what will happen as businesses open up again is on all of our minds. This causes confusion about what an economic recovery will look like. With this in mind, it’s important to understand how economists are using three types of sciences to formulate their forecasts and to work toward clearer answers.

  1. Business Science – How has the economy rebounded from similar slowdowns in the past?
  2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?
  3. People Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020.”

– Sam Khater, Chief Economist at Freddie Mac

This past week, the Bureau of Economic Analysis released the advanced estimate for Gross Domestic Product (GDP) for the first quarter of 2020. That estimate came in at -4.8%. It was a clear indicator showing how the U.S. economy slowed as businesses shut down and consumers retreated to their homes in fear of the health crisis and of contracting COVID-19.

Confused About the Economic Recovery? Here’s Why. | MyKCM

As more businesses feel the effects of this health crisis, experts agree that the second quarter of 2020 will see an even greater slowdown. These same experts, however, project businesses will rebound. With a recovery beginning in the second half of this year.

Bottom Line

As time goes on, we’ll have more clarity around what the true economic recovery will look like. Plus, we will have more information on the sciences that will affect it. As the nation’s economy comes back to life and businesses embrace new waves of innovation to serve their customers, the American spirit of grit, growth, and prosperity will be alive and well.


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