This article appeared online at TheNewAmerican.com on Sunday, March 22, 2020:
Goldman Sachs, the international banking behemoth, said Friday that it was revising downward its best estimate of the impact the COVID-19/coronavirus shutdown was likely to have on the U.S. economy: from a negative five percent in the second quarter (April-May-June) to a breathtaking 24-percent decline. This would be the largest contraction the economy has seen since the first quarter of 1958, when the GDP declined by 10 percent.
The investment banking firm also estimated that filings for unemployment insurance benefits would soar to a record 2.25 million this week, more than triple the prior record of 695,000 claims in 1982. This would push the unemployment rate from the middle three-percent range to nine percent, or even higher. That would reflect more than 10 million people being forced to file for benefits after being laid off.
Goldman’s economists wrote: “Why such an extreme forecast … in Q2? The sudden stop in U.S. economic activity in response to the virus is unprecedented, and the early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway.”
Some commentators are predicting a recession, usually considered to be two back-to-back quarters of negative growth (shrinking). But the National Bureau of Economic Research (NBER), the private non-profit research organization tasked with determining when recessions begin and end, defines a recession differently:
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
Accordingly, the shutdown, if it is short, isn’t likely to result in a full-blown recession. Instead history is likely to record not only that it was short in duration but that the economy’s reaction to it was overblown.
And its end is likely to have many remarkable ameliorative and positive effects, some of which are already occurring.
Consider, for example,