December 6, 2024

Diabetestracker

Passion For Business

Expectations for recession: Sharp but hopefully short

Transcript

Greg Davis:  There’s been a lot of concern around the R word “recession”. What’s your team’s thoughts in terms of the likelihood that we’re going to enter a recession and what you would be looking out for?

Joe Davis:  Well, unfortunately, Greg, you know the U.S. economy is going to enter a deep recession. You know, the nature of the efforts to contain the virus has also led to closures or suspension of a lot of business activity, particularly in the service sector. And so our estimate is that the economy will contract, on an annualized basis, perhaps as much as close to 20%, which is significant over the next several months. It would be the largest single quarterly drop in our history since at least World War II, at least since records have been kept. Consumer spending will particularly contract in leisure, hospitality, restaurants. We’re already seeing that, and it’s not going to be news.

Unfortunately, because of the nature of the shock and how quickly it has hit, many businesses have effectively a cash vacuum because revenue is dried up, and because of that, unfortunately, the unemployment rate is going to really rise rapidly in a very short period of time. The biggest, probably sharpest increase we’ve ever seen. Now again, I’m not trying to scare investors. It’s just it’s going to be a profound, sharp fall.

Now the one positive is that, again, this is based upon what we anticipate in not only fiscal response but hopefully the nature of the need for containment dissipates as the virus does. That is our baseline assumption. If that occurs, then towards the end of the summer of the U.S. economy is actually growing again, which would mean that the recession, although it will be very deep, ironically, could also be the shortest in our history.

Greg:  Which would be great news.

Joe:  Which would be great news. Now we would climb out of it. It would take a little bit of time, but I think again, part of this has been, the ability of consumers and businesses to pursue economic activity rather than the willingness. And so that would dictate all else equal, the recovery should be so much stronger and certainly stronger than coming out of the fiscal crisis in 2009 and 2010.