If you have ever seen a historical war (e.g. the US Civil War) depicted in a movie, you tend to think that the most dangerous period is the battle. With cannonballs flying, bayonets swinging, and rifles blazing – it’s easy to assume that the most lethal part of war is the direct assault. The reality was a little different: managing the aftermath of a conflict was actually more dangerous than the battle itself. Before the advent of antibiotics and sterilization techniques, disease and infection were substantially more likely to create casualties than injuries sustained during a conflict. Over time, strategists have realized that maintaining safe conditions is vital for a recovery.
Since the beginning of the coronavirus outbreak, we have assumed that the second quarter of 2020 would mark the bottom of US economic activity. Wall Street analysts suggested a range of -27% to -42%. Now we know how bad it was: GDP fell 32.9% in the second quarter – the worst number ever recorded. The contraction was widespread hitting personal consumption, exports, inventories, investing, and municipal spending.
Everyone knows Q2 was bad, but it is behind us now. The bigger question is how fast can our expansion be? The problem we’re facing now is widespread COVID-19 outbreaks in the southern United States, which is in turn stifling the recovery. The Federal Reserve recently highlighted slower rehiring efforts. Jobless benefit rolls are expanding, instead of shrinking like they should be. Oxford Economic Recovery indices are showing flat economic measures in the past few weeks. Reuters reports foot traffic to retail stores is stalling through July.
We are not maintaining safe conditions necessary for a full recovery and, as a result, our long hoped for bounce-back is being restrained.