May 13, 2020 - Economy

Americans don't realize that coronavirus recovery may take months

Illustration of a water drop falling on a stack of Benjamins

Illustration: Aïda Amer/Axios

Economic experts including Fed chair Jerome Powell, IMF chief economist Gita Gopinath and a multitude of top market analysts and economists have been saying for weeks that a quick economic recovery is a "fantasy" and likely at least a year away.

The state of play: Average Americans aren't listening, and many are still banking on a V-shaped bounceback from the coronavirus pandemic once lockdown orders are lifted.

Driving the news: The NFIB's latest small business optimism survey showed that a "collapse in sales has led to lower earnings and dampened employment prospects for months to come."

  • "However, small business owners remain optimistic in the face of adversity as more expect the economy to improve ... and expect the recession to be short-lived."
  • Business expectations over the next six months jumped by 24 points from March.
  • And the outlook for business conditions in April rose to the highest in more than 18 months.

One level deeper: Workers have shown similar optimism, with 78% of all unemployed Americans expecting to be rehired in the next six months.

  • However, a new study by top academic researchers projects that more than 100,000 small businesses have closed permanently since late March, with at least 2% of all American small businesses now gone.
  • At least 3% of restaurant operators have gone out of business, according to the National Restaurant Association.
  • Major companies like Neiman Marcus, Forever 21, Gold’s Gym and Modell’s Sporting Goods have announced bankruptcy plans, while 3,000 store closings have been confirmed this year by companies including GNC, Macy's, GameStop and many others.

What's happening: "Consumer confidence is signaling a bit of cognitive dissonance right now," Joseph Brusuelas, chief economist at tax and consulting firm RSM, tells Axios. "People want to believe that their portfolios will recover in one calendar year."

  • A Harris Poll survey of ordinary Americans released today found nearly a quarter (23%) have put more money into the stock market, compared to 19% who have taken money out and 45% who made no changes.

The last word: That "cognitive dissonance" could also help explain why even with an unemployment rate that's likely above 25%, U.S. rent payments have decreased by just 1.5% from comparable May 2019 levels, despite eviction moratoriums.

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