US Economy may already be in Recession due to covid-19 as per Alan Blinder
The global economy is already in a slowdown due to various reasons like the coronavirus outbreak, OPEC failure, and several others. Amid these unfortunate events, a financial crisis is feared to be incoming in the US by the investors. But the US economy is already in the lap of Recession due to covid-19 as per this economist.
On Wednesday, Alan Blinder said, “I wouldn’t be one bit surprised if when we look back at the data, it is decided … that the recession started in March,” He added, “We won’t know that. It takes months to get the data that would be relevant to a call like that. But it wouldn’t be a bit surprising to me.”
It will be pretty immature to call the period a recessionary one just yet, as per the dictionary definition, a recession is declared when two quarters consecutively reflect economic growth in negative terms, and other factors are taken into consideration before announcing such a crisis, like the rate of unemployment and poverty.
Courtesy of the Recessionary history, we can say that the official identification of the Recession comes a bit later than the social realization of a recession. The official authority that has the responsibility of declaring Recession is the National Bureau of Economic Research. This official organization is cautious in causing panic due to the Recession, as it performs various researches before declaring an economy in Recession.
For instance, during The Great Recession, the Recession was considered to be started in December of 2007, but the NBER declared the same after a year. The current situation is hurting the business as a whole, because of the fear of going out of houses, due to the dismay of catching the covid-19 virus.
If people are refusing to get out, how will the businesses make any money and make profits? The fear is evident from the fact that many large US corporations are making their employees work from home. While this may prevent the work from stopping altogether, the effectiveness will be far from the in-office one.
Blinder also supported the statement, and he said, “You can understand why people don’t want to go to restaurants, shopping malls, not to mention travel,” he said. “Spending on all of those categories has probably plummeted and much faster than our system catches it.”
The current situation due to covid-19 has not been all-negative though when we talk about the Housing sector, the sales have rapidly increased in recent times. The problem arises when we talk about the future, as the no. of cases of the coronavirus has quickly been growing, and its decimation is not certain.
Blinder added, “This is going to go through the country the way normal recession forces go through the economy,” “I completely agree with what Secretary Mnuchin just said, but I would go much broader. This is not only about travel, this is about anything that puts people in face-to-face contact.”When we look back at this episode, we’ll conclude that March 2020 was already a recession month,” he added.