- The Dow plunged last week to a level not seen since the financial crisis of 2008 as economists predict a deep recession.
- Businesses are shutting down as people stay in their homes.
- Fiscal stimulus will probably only blunt the pandemic, not stop it.
The Dow Jones ended its worst week since 2008, with a 17.3% loss, as the coronavirus pandemic grinds the economy to a halt. The index has plunged in four of the last five weeks.
U.S. crude oil prices fell, with investors expecting a sharp drop in demand as manufacturing, travel and trade nearly stop.
Investors fear that the coronavirus will push the United States and other big economies into major recessions. They don’t believe that emergency actions by central banks and governments to mitigate damages to the economy will work.
The actions that governments are taking to contain the spread of the virus are causing massive disruptions and layoffs.
Coronavirus Is Shutting Down The Economy
Businesses and communities across America are feeling the adverse effects of the coronavirus pandemic. The U.S. economic outlook is getting darker every day. Millions of people are facing unemployment.
Stocks and oil prices fell as federal and state governments shut down key segments of the economy in hopes of limiting the spread of the virus.
The governors of New York and California have ordered residents to stay home. Businesses like restaurants and retailers, which rely on consumer traffic to survive, have shuttered their doors and laid off workers.
The pandemic is even forcing factories to stop operations. The country’s largest automakers – General Motors, Ford Motor and Fiat Chrysler – have decided to idle their factories for at least a week as a precautionary measure.
The New York Stock Exchange will close its trading floor starting on Monday, March 23, while electronic trading continues. The decision comes after two people tested positive for the coronavirus during screenings set up by NYSE.
According to economists, the coronavirus pandemic is pushing the country into a recession, as Americans are locked in and businesses are shutting down. But it’s more difficult to predict the bottom and the time it will take for the economy to recover.
Goldman Sachs’ economists predict an unprecedented 24% drop in U.S. GDP in the second quarter. They also forecast weekly jobless claims to spike to 2.25 million, up from 281,000 in the previous week. This would be the largest one-week jump in history.
Greg Daco, chief U.S. economist at Oxford Economics, says the unemployment rate could reach 10% in April. Unemployment rates could be even higher in the coming months.
February’s new home sales are expected to be 750,000, a decline of 14,000 from January. The University of Michigan’s consumer sentiment indicator could plunge from 95.9 to 84.5. These numbers could drive another sell-off in the stock markets.
Federal Stimulus Isn’t Enough To Stop The Panic
The proposed federal stimulus will be somewhat useful, but will likely only soften the impact of the pandemic.
Beth Ann Bovino, chief U.S. economist at S&P Global, believes checks won’t be enough to help people:
A $1,000 check, or even a $2,000 one, won’t pay the rent in New York City, and I suspect it would run out pretty quickly in most parts of the country. It’s nice and it’s needed, but it’s just a Band-Aid.
Ultimately, the severity of the recession will depend on the duration and impact of the pandemic.
Investors need to see the number of new coronavirus infections stop accelerating for market volatility to subside. But people will probably be more cautious even after things go back to normal.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.