Mar 23, 2020 - Economy & Business

Coronavirus has left us with nothing good to say about the economy

Illustration: Eniola Odetunde/Axios

While you might be tired of all of the doom and gloom that's been written about the economy over the past two weeks amid the coronavirus outbreak, there's an even more depressing fact to consider: there is nothing bright and hopeful to say right now.

The state of play: Congress' failure Sunday night to pass a major stimulus program illustrates once again how dysfunctional our government has become and how at risk the world is for catastrophe.

Threat level: Lawmakers weren't able to get the trillion-dollar proposal passed despite St. Louis Fed president James Bullard warning that U.S. unemployment could rise to 30% and GDP (overall, not growth) could decline by 50% in the second quarter.

  • "Millions of people are going to lose their jobs," Minneapolis Fed president Neel Kashkari said on "60 Minutes."

What's happening: Wall Street traders and money managers are scrambling for cash like nothing I have ever seen before, fire selling even safe assets like U.S. and German government bonds, and economists are throwing out and rewriting their economic projections on a near daily basis.

  • The National Association for Business Economics even scrapped its first quarter projection altogether, noting that "the effects of the pandemic are currently making a timely and accurate forecast impossible."

Between the lines: "The bigger concern here is that you have all these small- and medium-sized businesses which will be under extreme stress and forced to shut down, and we don’t have a benchmark for how to recapitalize them or to keep them in business," Matt Luzzetti, Chief U.S. economist at Deutsche Bank Securities, tells Axios.

Small business owners seem more scared than the stock traders.

  • I've spent the past week talking to restaurant and bar owners who are literally in tears because they are certain that the businesses they've spent their lives building are about to be torn apart.
  • As a result, we are in the midst of the worst wave of job losses in U.S. history — and a majority of Americans have no savings and nearly half were making just enough to survive before.

The big picture: Over the past few years, I have written about a lot of things that could go wrong:

What it means: I have feared for some time that all of those chickens were due home to roost, but thanks to coronavirus they could now all hit home at once.

The bottom line: From a Slack conversation I had with Axios Pro Rata editor Dan Primack on Wednesday:

  • Me: "You know this is gonna be way worse than everyone realizes, right? That's the thing I realized today. Way worse."
  • Dan: "oh yeah. worst of my lifetime. by a lot."

Go deeper

The world's debt situation is much worse than in 2008

Illustration: Rebecca Zisser/Axios

Perhaps the biggest risk for financial markets is the potential for wide-ranging debt defaults, particularly as companies have significantly increased their debt load and more are rated at the bottom of the investment grade ratings scale.

Why it matters: The world's companies are in a much worse position amid the coronavirus pandemic than they were ahead of the global financial crisis.

The coronavirus pandemic is hitting Main Street

Illustration: Aïda Amer/Axios

America is grinding to a near halt to slow the spread of the coronavirus outbreak. It's wreaking unprecedented havoc on the restaurant and retail industries — and their millions of workers.

Why it matters: Amid all the discussion about how the pandemic is roiling Wall Street, its most acute impact is being felt on Main Streets around the country.

When $2.2 trillion is not enough

Illustration: Eniola Odetunde/Axios

Perhaps the most important thing about the $2.2 trillion stimulus bill the Senate passed late Wednesday night is that it is not a stimulus bill at all.

  • It is not intended to stimulate growth and spending to offset a potential downturn; it is designed to prevent mass homelessness, starvation and a wave of business closures not seen since the height of the Great Depression.