Eyeing an Economic Recovery – June 17, 2020

Economists use letters of the alphabet to describe economic recoveries.

• A V-, U-, L-, or W-shaped recovery.

You see, the letter is designed to describe the trajectory of the economy.

New descriptions have been created, including the ‘Nike swoosh,’ which would be a gradual bottoming like a U followed by a steady recovery.

• It’s less aggressive than a V, but we don’t get a double-dip like a W, or worse, an L-shaped trajectory.

Early data points are encouraging

Employment in May increased by 2.5 million vs an expected loss of 7.7 million.

Retail sales in May rose a record 17.7% vs an expected gain of 7.5%.

Last month, industrial production rose 1.4% vs an expected 2.9%.

• Manufacturing production rose 3.8% vs an expected 3.6%.

Sources: U.S. BLS, U.S. Census, Federal Reserve, Econoday

Thoughts

Early data are being aided by state reopenings, workers being recalled, and stimulus spending.

Yet, we are well below February’s economic peak. Continued job growth is needed, and another round of stimulus may be required. While layoffs are slowing, they remain at historically high levels.

A key factor will be the path of the virus. Might we see a second wave that forces consumers to hunker down again? Might we get a vaccine or an effective treatment? No one knows for sure.

Are we in a V-shaped recovery? The jury is still out, the outlook is unusually uncertain, but early indications are cautiously encouraging.

Created 2020-06-17 14:49:12