Economists are warning that the downturn caused by the pandemic is now creating another recession: mass job losses, business failures and declines in spending even in industries not directly hit by the virus, Axios Markets editor Dion Rabouin writes.
- Why it matters: The looming recession — a possible recession within a recession — is less severe than the coronavirus-driven downturn. But it's more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy.
- Darius Dale, managing director at Hedgeye Risk Management, tells Axios: "Our view is that the U.S. economy is transitioning from a depression to a recession and not a recovery."
The warning signs seen by Ernie Tedeschi, a managing director and policy economist for Evercore ISI, and others:
- The increasing number of layoffs that have gone from classified as temporary to permanent.
- The increasing number of men who have lost jobs in recent months — a traditional recession dynamic and reversal of the trend that saw more women being laid off in early months.
- The rising rate of long-term unemployment, an unfortunate hallmark of the Great Recession.
What to watch: It'll be hard to see the recession in most data, because third-quarter economic growth will be compared to the second quarter, which was the worst downturn in history.
- Absent another wave of lockdowns, Q3 GDP growth should be the highest ever — but largely because of pent-up demand and the simple fact that most U.S. businesses are allowed to operate.
The historically right-leaning National Association for Business Economics recently released a poll of its members that found two-thirds believe the economy is still in a recession.
- More than a third (37%) see a one-in-two chance of a double-dip recession — an occurrence that Hunter notes is "extremely rare."
The bottom line: The recession within a recession is giving economists flashbacks of 2008 and the long recovery needed to get many of the country's lower-income citizens back on their feet.
- The difference this time is that it follows an economic shock that caused at least three times the number of job losses as 2008, and has put four times as many people on government unemployment insurance.
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