Key indicators suggest the country’s recession could end by late summer if states pursue an aggressive reopening timetable, according to two economists advising President Trump on plotting a course out of the coronavirus downturn.
Arthur Laffer and Stephen Moore, both members of the president’s Great American Economic Revival Industry Groups, say the modest increase in gold prices and the stock market’s resilience suggest a short shock rather than the deep malaise of a depression.
Their analysis echoes Trump’s recent optimism but stands in contrast to other economists who see a longer downturn amid public anxiety and the risk of a second wave of infections.
“We are advising the White House and many governors across the country, there is a big difference in the swiftness and size of the recovery based on the speed at which states reopen,” Moore said.
“Connecticut, Michigan, New Jersey, and New York would be wise to follow the leads of the states in the South and Mountain States, or they could see a deep recession through the end of 2020.”
Their analysis concludes that “with the right national policy prescriptions and most states reopening their economies next week, we will see a very sharp contraction this summer with high unemployment, followed by a strong recovery that will arrive within three to six months.”
Fresh job figures on Thursday showed the extent of the downturn. More than 3.8 million people applied for unemployment benefits last week, pushing the total past 30 million in the six weeks since COVID-19 prompted states to begin ordering nonessential businesses to close.
A day earlier, Trump expressed his hopes of a swift recovery.
“We’re seeing tremendous pent-up demand,” he told a meeting of business executives. “And it’s a beautiful thing to see.”
In their analysis, Moore (who writes columns for the Washington Examiner) and Laffer said that they looked at gold prices and market performance in the run-up to the Great Depression, the stagflation of the 1970s, and the Great Recession of 2007-2008. In each case, the price of gold (an indication of investors seeking out a safe haven) rose far more than the near 20% increase seen in the past month.
Nor is there any sign in market numbers of looming inflation, they conclude.
“There is just no indication of anything like a Great Depression,” said Laffer, who was recently awarded the Presidential Medal of Freedom.
Their analysis shows that New York and Texas will be particularly badly hit, the former because of the scale of coronavirus damage and the latter due to the plunge in oil prices. But overall, the longer that states remain closed, the longer the national economy will take to return to growth.
However, other economists, including conservative advisers, see a less rosy, more complex future.
Last week, acting Chairman of the White House Council of Economic Advisers Tomas Philipson told the Washington Examiner that recovery was not just about states lifting restrictions. It was also a question of public confidence.
He said, “People have been scared, and the question is: How quickly are they going to come back from that?”
