What a difference six months makes.
Dr. Kenneth Kriz, an economics professor at the University of Illinois-Springfield, said in December 2019 at a Quad Cities Chamber of Commerce event that there was a “small probability” of a national recession. Then COVID-19 gripped the U.S. in March, and the pandemic continues to cause ripples throughout everyday life.
Kriz returned Wednesday morning, via an online conference sponsored by the Chamber, to give an economic update.
“One thing I think this recession has taught me and my colleagues is to be humble, and that things can arise out of the blue,” he said.
Clicking through presentation slides during his Wednesday morning talk, Kriz said nationwide unemployment was probably between 15 to 20%, whereas the rate is closer to 13% in the Quad-Cities.
While much of the economic recovery talk has been focused on when businesses may reopen to in-person services, the bigger picture focuses on how long it will take to return the economy to where it had been earlier this year.
Citing a recent poll of economists, Kriz said predictions fall into primarily three camps:
• Only 6% of economists predict a V-shaped recovery, or a quick rebound following a quick downturn, that would lead to the economy returning to pre-coronavirus levels by the first or second quarter of 2021.
• A larger group are predicting a longer recovery, such as a U-shaped pattern (35 to 40%) where the bottom is extended out with the economy not fully rebounding to pre-COVID-19 numbers until the end of 2021.
• The other popular theory among economists, 40%, is a Nike logo “swoosh” recovery where the path back to pre-coronavirus takes several years, similar to the Great Recession in 2008 and 2009.
• The worst-case scenario for economic recovery is a W-shape, which would mean a second economic hit from another pandemic of coronavirus that triggers a “longer, more painful” economic recovery, Kriz said.
“Much of the policy response, much of the stimulus and most the Federal Reserve’s policy has been undertaken under the assumption we either have a V-shape or a U-shape. I don’t want to scare anybody, but this seems to be the season for fear. If we have a resurgence in the pandemic, a lot of our models that our stimulus are built on go out the window and we’ll have to scramble again for solutions,” he said.
Those economic theories also have to deal with the opposing forces of those who want to get out and have dine-in meals versus the health concerns.
“I think it’s too early to tell what’s going to happen and how people are going to react,” Kriz said.
Citing economic historians, he said people weren’t comfortable going into large crowds until 1920 after the Spanish Flu pandemic of 1918.
“I think the psychology will start to play with us more if we have a second wave. If we can get through this and we don’t have a resurgence, I think people will start to feel more comfortable,” Kriz said.
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