Two economists analyze what recovery looks like once economy opens
PROVIDENCE, RI (WLNE) – As talks about reopening the economy have been swirling on the state and federal level, two local economists believe the country still would have a long way to go even when businesses are able to open up shop.
With unemployment numbers in the US topping 22 million, and with claims in Rhode Island at 159,000, experts believe it will still take some time for the country to get back on its feet at an economic standpoint.
Christina Gatteri, a certified financial planner, and Liam Malloy, associate professor of economics at URI, both say that it’s a financial situation our country has never seen.
It’s been caused by a virus and not by an economic trigger.
“I don’t think things are going to look the way they did and I think for us to have any semblance of normalcy, like what it used to look like, I think it’s going to take quite a while,” Gatteri said. “That uncertainty is unsettling.”
“I think the economy can’t really recover until we have a handle on the pandemic,” Malloy said. “The longer this lasts I think the more difficult it’s going to be.”
Another grim reality for the two is the fact that when businesses around the country open back up, it’s not guaranteed all 22 million people will have those jobs waiting for them.
“I think it’s fact at this point that not everyone is going to have a job to go back to,” Gatteri said. “We just hope that it’s fewer than it would have been had our government not taken action.”
Malloy said that it comes down to how far those unemployment numbers dip, adding that the country should try to avoid “depression-like” numbers that could come in the summer.
“If we’re looking at 20 percent unemployment in April, which I think is probably where the number is probably going to be, that’s going to reduce spending, that’s going to lead to more layoffs,” he said.
In a scenario where the economy opens back up, it doesn’t necessarily mean people will be putting money back into local businesses.
As for the stimulus checks, Gatteri and Malloy said it’s not really there to stimulate the economy, with Malloy going as far as to call it “disaster relief” to help people pay their bills.
“The economy can be open all day. But if people aren’t patronizing establishments then it doesn’t matter,” Gatteri said. “We are receiving economic stimulus to be motivated to spend that money. But I tell you what, the people I’m talking to are saving it, or they’re paying down loan debt.”
Putting faith back into the economy all comes down to how safe people will feel outside of their homes and when small businesses open back up, they can’t expect a rush of customers right away.
“Consumer confidence is really going to be about how comfortable do I feel going out to a restaurant, going out to the movies, going out to a concert,” Malloy said.
So, how long can this recovery process take? It depends who you ask.
For Gatteri, it’s really hard to say, but she’s treating this similar to the 2008 financial crisis.
“Look, if I had to put a number on it I’m looking out ten years right now,” she said. “I’m looking at this as if it were a traditional bear market recession. And that’s at least a ten year time frame, like we saw recovering from the 2008 financial crisis.”
Malloy believes we’re most likely going to bounce back six months to a year after we defeat the virus.
To avoid anything more long-term, Malloy said it’s important for the government to continue helping laid off workers pay their bills to avoid a financial crisis.
“When we can end this social distancing. Frankly, the faster we end it, the faster we’re able to end it, the faster that we’re going to recover,” he said. “I think we’d start recovering pretty quickly once a vaccine came, once we can all start working again.”
As for the stock market, both Gatteri and Malloy said that even though it has shown some recovery during the pandemic, it’s still in for a volatile and wild ride.