President Trump is pushing to loosen coronavirus restrictions to help revive a devastated economy, a move he hopes will lead to a quick recovery before Election Day.
The Trump administration this week rolled out guidelines for states to follow starting May 1, as some governors gradually allow businesses to reopen and scaled-down social gatherings to take place. The president also convened nearly a dozen advisory panels tasked with figuring out how to reboot every sector of the economy.
The widespread shutdown of businesses and social gatherings across the U.S. has been credited with slowing the spread of the deadly virus but at the cost of millions of jobs and likely thousands of businesses. As Trump nudges Americans out of isolation, he’s expressed confidence that the economy can swiftly return to its pre-pandemic strength.
“We really think with all of the stimulus and all of the pent-up demand, we’re going to have an economy that really comes back quickly,” Trump said at the White House this week. “What we had before was a miracle, and we think this is going to be even more than a miracle.”
With the presidential election just over six months away, Trump is eager for a return to the economy that was seen as his strongest argument for a second term. But economists warn that the recovery will be long, grueling and far from anything close to normal.
“I don’t see the economy being back to full strength by the end of the year. It’s going to take us longer to get us back to where we want to be,” said John Williams, president of the Federal Reserve of New York, in a Friday interview with CNBC.
More than 20 million people have applied for unemployment benefits in the past four weeks, according to the Labor Department, nearly wiping out more than a decade of job gains after the 2007-09 recession. Millions more are believed to have lost their jobs but have been unable to apply for or are disqualified from receiving unemployment insurance.
“The more unemployment, the more workers lose their jobs, the harder and slower the recovery is going to be,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth, a think tank.
“That is an incredible amount of damage we have to unwind,” she said, adding that the real-time unemployment rate is likely above 20 percent.
Before the pandemic hit, the jobless rate consistently hovered around a 50-year low of 3.5 percent.
As recently as February, the stock market and consumer spending were outpacing other industrialized nations, many of which were teetering on the brink of recession.
The relative strength of the economy heading into the pandemic fueled hopes of a V-shaped recovery when the virus subsided: a sharp decline in economic activity and employment canceled out by a quick rebound that’s similar in size and speed.
But while trading partners such as South Korea and Taiwan were able to avoid widespread closures by quickly identifying and isolating coronavirus cases, the severe lack of testing capacity in the U.S. forced Americans into quarantine to prevent an outbreak from spiraling out of control.
“What we did was the responsible thing to keep people from dying. But as soon as we went down that path, you took a V-shaped recovery off the table,” Sahm said.
The federal government has sought to cushion the blow of the pandemic and clear the path toward recovery with trillions in economic relief. Trump last month signed a historic $2.2 trillion rescue package, and the Federal Reserve has pumped trillions more in loans and securities purchases into the economy and financial markets.
The unprecedented levels of stimulus have likely saved the economy from a free fall and allowed for the possibility of a piecemeal recovery to begin when the virus subsides. Trump and some of his economic advisers are bullish that parts of the country can return to normal life within weeks while raising concerns that waiting too long to loosen restrictions could lead to lasting damage.
Even so, the level of economic pain inflicted during social distancing means the U.S. will likely emerge from the pandemic with millions of debt-saddled workers chasing fewer and fewer jobs.
“We might see one brief shining moment of stronger economic activity as businesses reopen because we’re going to go from zero to something and that will feel good,” said Mark Zandi, chief economist at Moody’s Analytics. “But after that temporary burst of activity, people will see we’re still in the soup. It’s going to take a while to kind of work through all the problems created during the shutdowns.”
Experts also warn that the country is unlikely to repair the economic toll of the pandemic without a vaccine to quash the chance of another outbreak. Until then, businesses that depend on constant crowds and steady travel may continue to suffer.
“This is not going to turn on a dime,” said James Gorman, president and CEO of Morgan Stanley and a member of Trump’s reopening advisory panel of bankers, in an interview with CNBC.
“We’re not going to get to the point where everybody is on the subway in one day. To get consumers and small businesses back and to get everybody feeling like the world is stable again, that’s going to take months,” he added.