Editor’s note: Natalie Gochnour is an associate dean in the David Eccles School of Business and director of the Kem C. Gardner Policy Institute at the University of Utah. She also serves as the chief economist for the Salt Lake Chamber of Commerce and is a regular columnist for the Deseret News.
The economic pain from COVID-19 continues to build. Since late February, approximately 125,000 Utahns (8% of the workforce) have been furloughed or laid off. More job separations are certainly on the way. We are all asking, “When will the economic misery end?”
Perhaps the most important insight regarding this question came from the nation’s top immunologist, Dr. Anthony Fauci. He said, “You don’t make the timeline; the virus makes the timeline.” With this in mind, I’d like to share insights on common economic questions.
How much worse will this get?
Let’s be honest … it’s hard to imagine it getting much worse. In 42 days, Utah wiped out nearly all of the jobs that our nation-leading economy created in the past three years. More job losses will follow, but I expect April 2020 will be the highpoint for job losses, with each subsequent month tapering down. The leveling off will occur because we now operate with more information, more adaptation and innovation, and more financial and regulatory assistance. We will slowly claw our way back, moving from the urgent phase, to the stabilization phase, and ultimately to recovery.
The one caveat is that we must avoid another major flare-up of the virus and statewide economic shutdown this fall/winter. Our actions will make the difference. We can avoid a double-dip recession if we prioritize testing, follow public health guidance, continue to innovate and make wise public policies.
When will it end?
It’s fashionable to apply letters of the alphabet to an economic recovery. A V-shaped recovery is rapid on the downside, swift on the upside. The COVID-19 recession will not be a V-shaped recovery. Too many businesses have been shattered, and it will take time to rebuild what’s been lost.
A U-shaped recovery has a longer bottom, but the pickup is still brisk. The COVID-19 recession will not be a U-shaped recovery either. We don’t know what the “next normal” looks like. Telework, dine-in service, large gatherings, education, commercial real estate and many other economic activities will all be different. Returning to our prior economic might will take time.
The dreaded W-shaped recovery is the double dip. This letter, along with the unfathomably L-shaped economy, are the ones we must avoid. A W-shaped recovery occurs when the economy regains its stride, then rapidly falls again, creating a painful and potentially cataclysmic hit to consumer confidence. Eventually the economy rises again, but only after inflicting significant pain. I have too much confidence in Utah leaders to forecast a W-shaped recovery, but it is always a possibility.
Rather than a letter of the alphabet, I expect the COVID-19 recovery to be a “tilted check-mark recovery.” Make a check mark on a piece of paper and then tilt it toward the long end. It includes a rapid fall (the short part of the check), followed by a steady, but slow economic climb up the other side. Utah’s economy will recover, but it will take time, perhaps two years.
How can we minimize economic harm?
The answer depends on modern medicine, adherence to public health measures, business innovation and skillful policy leadership. Until residents develop herd immunity or a vaccine/treatment is developed, Utah faces the likely reality of an economy with “stops and starts” as waves of new cases rise and fall.
We can control the impacts of these waves by investing in large-scale, random testing for the virus so we know where it resides and who it impacts. We can then target public health measures rather than using the blunt instrument of shutting down the entire economy. Gratefully, under the leadership of the governor and Legislature, Utah is doing this testing.
We can also manage the impact of the virus by adhering to public health guidance as we return to work, continuing to innovate and concentrating public policies on high-risk individuals.
If we all do our part, the worst is over. What happens next is in our hands as we manage this new risk.
Natalie Gochnour is an associate dean in the David Eccles School of Business at the University of Utah and chief economist for the Salt Lake Chamber.