July 6, 2020

THE WAGES OF SIN:

Trump's worst nightmare may be happening (Rick Newman, 6/30/20, Yahoo Finance)

This is precisely how a double-dip recession could occur, according to forecasting firm IHS Markit. Until recently, IHS thought the economy had bottomed out in April, with a robust recovery likely this summer and fall--provided coronavirus cases declined and stayed in check.

That's not happening. The daily count of new coronavirus cases in the country has recently exceeded the high from early April, when the disease was ravaging the northeast and a few other areas. In at least 7 states, including Arizona, Florida and Texas, the average number of daily cases is more than double the count from two weeks earlier. Broader testing explains part of the rise in cases, but hospitalizations have started rising again, after falling from late April to mid-June. More people going to the hospital means more people are getting dangerously sick from the virus, regardless of testing. Some governors are reimposing lockdowns to ease stress on hospitals that are filling with Covid patients.

As Covid rises, the economy sinks. Governors have no choice but to close more businesses as infections spread, if for no other reason than to spare hospitals and their workers. Even if governors didn't force closures, many consumers would know there's a problem and lock themselves down at home until it seemed safer to go out. Others are simply foolish, gathering in crowds without masks or other protections, as if invulnerable to a microscopic assailant they can't see.

If the reimposed lockdowns persist, there could be another downturn in spending and overall economic output, rather than a sustained recovery. "In this scenario," IHS writes in a recent analysis, "this combination of factors continues to fuel the increasing pace of new cases and deaths into the fall, when the turn to cooler temperatures exacerbates the spread of COVID-19. The resulting direct decline in consumer spending and knock-on effects is sufficiently sharp to push the economy back into recession beginning in the fourth quarter."

Posted by at July 6, 2020 12:00 AM

  

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