“All the economists I’ve talked to are as freaked out as they’ve ever been,” Jared Bernstein, who served as chief economist to Vice President Joe Biden in the Obama administration and informally advises his presidential campaign, told me.
Yet what is scariest about the new economic projections is that they are probably too rosy. Both Goldman Sachs and J.P. Morgan foresee big rebounds in the third quarter, over the summer, due in part to assumptions that the Federal Reserve will accelerate its moves to stabilize the financial system and Congress will soon enact another enormous fiscal-stimulus package. But the crisis might not be over by then. A federal-government plan to combat the pandemic estimated that it could last 18 months and hit in “multiple waves” that would require some degree of prolonged social distancing. Modeling by Imperial College London indicated a similar duration.
“The economy isn’t going to recover before the social distancing is over,” Shierholz said.
And even when life returns to some semblance of normalcy, the economic trauma won’t be over. According to Zandi, at least three big waves will hit American economy activity. The first is occurring now, as businesses close and the economy grinds to a halt. Next will be the job losses.
“The third wave will hit when people realize they are worth so much less, particularly the Boomers, who are focused on their retirement,” Zandi told me. “When they realize their nest egg has evaporated, they’ll go into panic mode and cut back on spending, and that further exacerbates the problem.”