Economists' consensus: April the worst for virus shutdown

By Brice Wallace 

The worst is over.

Maybe.

That was the view of a pair of economists during a recent webinar related to the business impacts of the COVID-19 pandemic.

“If there is good news, I think April will be the apex of the shock. This will be the very worst of it,” Mark Zandi, Moody’s chief economist, said during the “How to Rebuild Your Business and Reactivate Our Community” webinar, a collaboration of Leavitt Partners, Cynosure Group and University of Utah faculty.

“I think the very worst of unemployment, the very worst of the job losses, the lost profitability, the hit to stock prices, that all happened in April.”

Starting perhaps July 4 and continuing into the summer, Zandi said, business condition should improve.

Natalie Gochnour, associate dean at the Eccles School of Business at the UofU and director of the Kem C. Gardner Policy Institute, agreed.

“I think the worst of times for the Utah economy will go down in history as being April 2020, and I expect that in the next 60-90 days we’ll actually start to see job increases again,” Gochnour said.

But the “maybe” hovers over those assessments, in the form of a possible second wave of the virus.

“If we have another surge, though, my guess is, the hit to the economy will be such that we will be calling this period a ‘great depression’ and both Natalie and I will be wrong about April being the apex of this shock,” Zandi said. “It will turn out to be something else.”

Even if that were to occur, he does not expect another economic shutdown. While at-risk populations will shelter in place and healthcare facilities will work to better equip themselves, “we’ll just try to do our very best to navigate through without a shutdown,” Zandi said.

The pandemic already has caused businesses to shut down temporarily if not permanently, cost the U.S. up to 25 million jobs and pushed unemployment to about 25 percent — a level last seen nine decades ago.

“You have to go all the way back to the Great Depression of the 1930s to find unemployment that high, and, again, I don’t know that does justice to the financial pain and suffering,” Zandi said. “This is a body blow to the economy that is just unprecedented from every perspective.”

Still, Zandi noted that the Great Depression lasted a decade. “This [pandemic] is a brief, in a historical context, month or two, but it does give you a sense of the magnitude. This is something just off the charts, a one-in-100-year event,” he said.

On the plus side, both Zandi and Gochnour acknowledged that Utah is well-positioned to get through the troubles. Zandi said Moody’s analysis shows Utah the second-least-affected state and Utah has been careful “in your planning to prepare for the possibility that this virus is going to be with us for some time.”

Utah entered the pandemic with the lowest unemployment rate in its history, a strong unemployment insurance trust fund and rainy-day funds. “It’s been a really tough hit to the Utah economy, but we entered it in good shape,” Gochnour said.

She described the pandemic effects as “very sudden, very acute and concentrated” in certain industries and geographic areas of the state. She expects the ongoing impacts likewise to be unequal and uneven, with an employment drag in place until a treatment or vaccine is developed.

Zandi believes the national economy will have troubles until a vaccine comes along, even though he expects “significant” jobs gains from June into September. “But we’re not going to get all those jobs back (by year-end). That’s going to take a while,” he said. “That’s going to take at least two, three, four years before we get those jobs back.”

In the meantime, industries and businesses need to adjust and be ready for any new developments, they said. Zandi said that in the long term, businesses will need to mitigate risks to customers walking through their doors, perhaps gathering innovative ideas from other companies. Those that don’t change their business model going forward are “toast,” he said.

“If you’re not toast now, you’re going to be toast then,” Zandi said. “So you need to begin to think about how am I going to adapt my business, not only to this near-term problem that we’ve got, but to what will likely be a significant change to the business landscape going forward.”

Gochnour expects the pandemic to affect the economy for at least two years.

“If we get a vaccine by Christmas, like some people are saying, that would be a very fortunate event, but I think it’s wise for businesses right now to think more in terms of a two-year time frame that you reassess regularly,” she said.

“Let’s be clear, we can’t go another nine months [or] two years with a lockdown economy. We have to learn to work with this virus, and that’s why I think it is prudent that we begin to reactivate the Utah economy and start to turn that dial.”