The impact of the COVID-19 pandemic on the U.S. economy is like a speeding car coming to a screeching halt, said an Ohio Wesleyan University economics professor.
Bob Gitter’s lecture, “Sixty to Zero in Nothing Flat,” also outlined possible prospects for recovery. It was the 12th of 24 free classes on the novel coronavirus offered by Ohio Wesleyan.
Gitter said Wednesday the unemployment rate during the great recession of the last decade was 10.5%, and in April, it was 14.7%, “the highest in my lifetime. I would argue the story here was the decline was rapid and severe.”
Another economic indicator, the Gross Domestic Product, also had a major decline recently. The Dow Jones Industrial Average suffered a 30% decline, which has since recovered by half. Nonetheless, Gitter said many people are saying, “My 401(k) has turned into a 201(k). People feel less wealthy.”
As states were issuing stay-at-home orders, businesses were shuttered, and consumer confidence plummeted. Gitter said the federal government properly responded with stimulus packages, a form of CPR for the economy just to keep the patient going and things stable until a vaccine or effective treatment is found.
“I’m not being critical of these, but nothing can get the economy back to normal right now,” Gitter said. “This downturn is unique. We’ve intentionally shut down parts of the economy and for good reason. I think there’s going to be a different world because of COVID,” he said.
The CARES Act (Coronavirus Aid, Relief and Security) was effective in getting money into people’s hands quickly, Gitter said. Part of CARES was the Paycheck Protection Program, which gave loans and grants to small businesses.
“That was great, but we haven’t passed anything further,” he said. “CARES is desperately needed life-support but is not an economic cure. The way forward is a cloudy crystal ball. I could make some reasonable economic predictions if we knew what was going to happen with COVID. I will share with you some of my best guesses.”
There are four potential paths to recovery, each named because of the shape they make to a GDP chart. From most optimistic to pessimistic, they are: V, U, swoosh (like the Nike logo), and L. Gitter said his best guess was the latter two scenarios. He is also worried about the federal deficit and felt the budget should have been balanced in good times, such as 2019.
“If the government can’t pay its bills, it will have to borrow money at higher interest,” he said. Also, Medicare and Social Security could be depleted sooner.
The new normal from COVID-19 will result in changes to everyday life. Gitter said more people will be working from home, which allows for flexibility but potentially more on-call potential. There may be more use of telemedicine, which could lead to better health care provided there’s access to broadband and computers. In addition to more online shopping, there will be more austerity and less consumer confidence. Finally, more automation will result in the replacement of the least-skilled workers.
Almost half of Gitter’s time was devoted to answering viewer questions. He said he isn’t sure the country is ready for a Universal Basic Income, nor is he confident people will be willing to pay higher taxes to bring down the deficit. He also feels future job training needs to focus on both hard and soft skills.
In advising students, Gitter said, “College is still a great investment. Major in something you really enjoy studying — you’ll find a career. Things will take care of themselves, you’ll be fine in the long run. Develop your skills, network like mad. Pay off your loans, save some money. Investments? Buy low-cost mutual funds, never take it out until it’s time to retire. Thank me 40 years from now.”
Wednesday’s hour-long virtual class concluded week six of a 10-week, free online course called “We’re in This Together: An Interdisciplinary Exploration of the Coronavirus Pandemic.” Taught by 24 Ohio Wesleyan faculty members, the course is open to students and the public alike.
OWU spokespersons said more 1,200 people are participating in the class, and more than 350 people are taking part in a Facebook COVID-19 Class Discussion Group.
For more information about OWU’s “We’re in This Together” course, visit www.owu.edu/COVIDclass.
Gary Budzak may be reached at 740-413-0906 or on Twitter @GaryBudzak.