The U.S. economy will probably slip into a recession this quarter and next. While the stock market is now back where it was three years and $11.5 trillion ago , unemployment has rocketed to catastrophic highs .
Goldman Sachs projects a sharp swing into recession with 6% negative growth in quarter one, and a 24% contraction in quarter two .
Because of the suddenness and intensity of job layoffs, economists fear this one will be worse than the Great Recession . Analysts say even the $2 trillion stimulus package won’t hold back a recession .
While people are lighting up Google search with queries for “coronavirus,” searches for “unemployment” and “recession” are far outpacing volume after the financial crisis. But we might be heading or a depression instead.
A recession is two consecutive quarters of negative GDP growth, while a depression is much more severe and lasts far longer. These five economists say that’s what’s coming.
1. Former Federal Reserve Vice Chairman Alan Blinder is now a professor at Princeton. He says the U.S. has probably already entered a recession , and if coronavirus worsens we’ll enter a depression:
We think of a depression as a recession that is very, very deep and very, very long. That’s the kind of thing that could happen.
2. Maury Obstfeld is a former chief economist for the International Monetary Fund. When asked if there’s ever been another time in U.S. history that the economy has been so widely interrupted, he said:
Well, maybe the Great Depression.
3. Nouriel Roubini is a NYU professor and was the top White House economist in the Clinton Administration Treasury Department. He is less reserved in his comparison to the Great Depression. His analysis is troubling to say the least :
The shock to the global economy from COVID-19 has been both faster and more severe than the 2008 global financial crisis (GFC) and even the Great Depression.
He says in both previous episodes it took three years for the economy to crash as far as it nearly has in three weeks. He writes the current situation is far more dire than the Great Depression:
Not even during the Great Depression and World War II did the bulk of economic activity literally shut down, as it has in China, the United States, and Europe today.
4. David A. Rosenberg is a chief economist and global financial strategist at Gluskin Sheff & Associates. Prior to that he was the Chief North American Economist at Merrill Lynch.
He wrote a bleak warning in the Financial Post Monday :
It’s time for investors to start saying the D-word — this economic damage could be double 2008.
He argues while necessary to protect public health, efforts to contain coronavirus will plunge the economy into another financial crisis and high unemployment:
This national economic lockdown just has to last a month for us to see an absolute wave of defaults and bankruptcies with no jobs for people to go back to.
5. Peter Schiff is the the CEO and chief global strategist for Euro Pacific Capital. He predicts something much worse than the four others on this list, a depression accompanied by sharp inflation :
All of these so-called experts who think U.S. will just suffer a one quarter hit to GDP of 5% are nuts. Real GDP fell about 25% during the Great Depression. Since we are entering a Greater Depression, with sharply higher consumer prices, real GDP should collapse by more than 25%.
Usually during recessions and depressions, consumer prices go down– deflation. When there’s inflation during a period of economic contraction, it is especially miserable.