WASHINGTON (Xinhua) — As more US states started partially reopening their economies, many economists have warned that moving too fast might risk a second wave of infections, which could have grave economic impacts.
“If we get a second wave, it will be a depression,” Mark Zandi, chief economist of Moody’s Analytics, told CNBC in a recent interview, defining the depression as 12 months or more of double digit unemployment.
“We may not shut down again, but certainly it will scare people and spook people and weigh on the economy,” Zandi said.
Philadelphia Federal Reserve Bank President Patrick Harker warned that reopening the economy too quickly would not only bring a “health catastrophe” but also “reverse the economic recovery.”
“In this less hopeful scenario, I project a similar growth path to the baseline for 2020, followed by a painful economic contraction of GDP (gross domestic product) in 2021 as shutdowns are reintroduced,” he said at an event hosted by the Chicago Council on Global Affairs.
Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Indiana, recently told Xinhua that a second wave of infections would be “very damaging to the economy.”
Data released on Friday by the U.S. Bureau of Labor Statistics (BLS) showed that U.S. employers cut a staggering 20.5 million jobs in April, erasing a decade of job gains since the global financial crisis and pushing the unemployment rate to a record 14.7 percent.
While this marks the highest level of unemployment since the Great Depression in 1930s, analysts said the figure does not capture the full scale of the COVID-19-induced job crisis, and the worst is yet to come.
“An astonishing deterioration in the public finances is unfolding,” reported The Economists in late April, noting that the U.S. government is set to run a deficit of 15 percent of GDP this year.
Zandi said that jobs would start to come back by Memorial Day weekend in late May, as businesses gradually reopen. If there would be no second wave, he said the job growth would continue in the summer and early fall.
“After that, I think we’re going to be in quicksand because of the uncertainty around the virus and the impact that it’s going to have on consumers and businesses,” Zandi said.
Lawrence Summers, treasury secretary for former President Bill Clinton and economic advisor to former President Barack Obama, said in a webinar last week that getting the virus under control is “overwhelmingly more important” than anything else in order to get the economy back on track.
“If people are scared to go outside, they’re scared to go out to the store, they’re scared to be near each other, you’re not going to have a decently functioning economy no matter what fiscal and monetary policy you have,” said Summers. Enditem
The US currently accounts for the world’s highest number of COVID-19 cases and deaths at 1,347,388 and 80,397, respectively, according to the Johns Hopkins University.