The longest period of growth in American history has just officially ended. The economy fell by 4.8% in the first quarter – if annualized data is taken – weighed down by the dawn of the coronavirus, according to the figures published this Wednesday by the Department of Commerce, and which mark the turning point between two cycles that seem like two eras. In mid-March, the NBA canceled its league, Broadway theaters closed, Michigan’s big factories halted. The first world power started a self-imposed blackout in half the world to stop the escalation of infections. The newly known decline is deeper than expected, but it seems anecdotal compared to what is expected from April to June, a quarter that will have registered the impact of such hibernation: predicted collapse rates range from 30 %, 40%, and up to 60% in annualized figures.
The United States has not suffered such a debacle since the Great Depression, and the fear of a repeat of that economic trauma continues to win arguments. Since the COVID-19 crisis erupted, more than 26 million Americans have applied for unemployment benefits, a volume not recorded since records began (in the 1940s) and equal to one in six workers for someone else. This Thursday, when the new weekly data is known, the ratio can reach one in five. Thus, the country that in February was living a situation of almost full employment (3.5% unemployment) can face up to 20%. In 1933, the worst point of depression reached 25%.
Gone is a prodigious decade, more than that. Economic expansion in the United States broke the previous record of 120 consecutive months of growth last July , which was the boom before the 2001 dot-com crisis , during the presidency of Bill Clinton.
Recovery after the Great Recession was slow and uneven: it took almost 10 years for families to recover their pre-crash income level . Now, in just six weeks, all the jobs created since then have been lost and the glance to the immediate future gives vertigo. The price of a barrel of West Texas oil, the benchmark in the country, fell so much last week that the seller came to pay to get rid of it .
With the economy turned upside down, entire families out of work and endless lines of cars waiting to receive food from the charity, several states, such as Georgia, Texas or South Carolina, have already begun to revive life despite calls for caution from medical experts. The country as a whole has just exceeded one million infected, almost a third of all confirmed in the world, and more than 57,000 deaths (although with 330 million inhabitants, the death rate from this pandemic is much lower than that of countries like Spain). And despite the fact that in key territories such as New York, the epicenter of the problem, the rate of hospitalizations has decreased, the volume of infections is picking up in rural areas.
The calculation of how much it is convenient to de-escalate the restrictions, of how much more economic slowdown the country can support is complicated everywhere. Washington has already injected $ 3 trillion in aid and stimulus to save the economy, but confinement has wreaked havoc.
In mid-March, when everything began to collapse, on the public network PBS they asked Kenneth Rogoff, former chief economist of the IMF and professor at Harvard, with what he could compare what is happening, and considered that the closest thing was “an invasion alien”. “It cannot even be compared to the 1918 Spanish flu, because that was after the First World War and things were already bad. Here the aliens are invading us, they tell us to go home and not go out, and in the short term we are going to experience a recession as sudden as has only been seen in World War II, “he said.