A Cruel Paradox: Beating Virus Means Causing US Recession
AppleMagazine|March 20, 2020
The coronavirus is dealing a death blow to the longest U.S. economic expansion on record, triggering layoffs and putting intense strain on the nation’s financial system.

In a cruel paradox, the very steps that are needed to contain the outbreak — quarantines, travel restrictions and business closures — are bringing everyday business to a halt and shoving the U.S. economy into recession for the first time since 2009.

“The more rapidly you want to contain the virus, then the more severe the lockdown has to be and the more severe the disruption to economic activity is,” said Gregory Daco, chief U.S. economist at Oxford Economics. “The hope is, the more severe the lockdown, the sharper the rebound will be.’’

The “Lockdown Paradox,” he calls it.

Much will depend on how swiftly and aggressively the Federal Reserve, Congress and the Trump administration deliver financial aid to tens of millions of economic victims — from hourly workers with no more income to suddenly furloughed employees to businesses with loans to pay but no customers. Solving the health crisis by shutting down the economy, though, will have to come first.

The U.S. economy has never endured anything like this. The economic shock from the 9/11 terrorist attacks, painful as it was, was shortlived. The financial crisis and the Great Recession were devastating. But they weren’t intertwined with a calamitous health crisis.

In the near term, at least, Daco foresees excruciating economic pain: He expects the American economy to shrink at a staggering 12% annual rate in the April-June quarter. That would be the most dismal quarter on record dating back to 1947. After a second-half rebound, Daco thinks the economy will post zero growth for 2020 as a whole.

Financial markets are bracing for the worst. On Wall Street, the Dow Jones Industrial Average was down more than 1,300 points in late-morning trading and has plunged more than 9,600 points or 33% since Feb. 12.

The economy has deteriorated with stunning speed. And the United States is hardly alone: The U.N.’s International Labor Organization estimates that the coronavirus outbreak could lead to nearly 25 million job losses worldwide and drain up to $3.4 trillion worth of income by year’s end.

In the United States, a wave of layoffs has just started, especially in industries most vulnerable to an economic standstill: Travel, entertainment, hotels, restaurants, retail stores — the heart of the service sector, which makes up most of the U.S. economy. Unemployment is sure to rise, perhaps sharply, in the months ahead.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM APPLEMAGAZINEView All

CHINA NOT READY TO ALLOW THE BOEING 737 MAX BACK IN THE AIR

Beijing isn’t ready to follow the United States in allowing Boeing’s 737 Max back into the air after a pair of fatal crashes two years ago.

1 min read
AppleMagazine
AppleMagazine #488

MILAN DESIGNERS HIT RESET BUTTON DURING DIGITAL FASHION WEEK

Fashion is off the hamster wheel, taking a deep breath that is allowing some freshness to seep into the once relentless cycle.

4 mins read
AppleMagazine
AppleMagazine #488

SUPREME COURT SKEPTICAL ABOUT PATENT JUDGE APPOINTMENTS

The Supreme Court seemed likely to find that the judges who oversee patent disputes are not properly appointed, a case important to patent holders and inventors including major technology companies.

2 mins read
AppleMagazine
AppleMagazine #488

MUSIC: CLIMBING THE CHARTS TO BECOME NUMBER ONE

Though Apple Music may still be playing catchup to Spotify in terms of users, new data from the Mechanical Licensing Collective has revealed Apple is the industry leader when it comes to royalties, demonstrating the company’s commitment to paying talent.

6 mins read
AppleMagazine
AppleMagazine #488

COMIC-CON TO REMAIN VIRTUAL IN 2021, CITES FINANCIAL STRAIN

San Diego Comic-Con will remain virtual for the July event, but organizers are planning for a smaller-scale gathering later this year.

1 min read
AppleMagazine
AppleMagazine #488

ENERGY-RELATED EMISSIONS UP IN DECEMBER DESPITE PANDEMIC

Global energy-related carbon dioxide emissions rose slightly in December compared with the same month of 2019, indicating the sharp drop seen due to the pandemic was short-lived.

2 mins read
AppleMagazine
AppleMagazine #488

AI PANEL URGES US TO BOOST TECH SKILLS AMID CHINA'S RISE

An artificial intelligence commission led by former Google CEO Eric Schmidt is urging the U.S. to boost its AI skills to counter China, including by pursuing “AI-enabled” weapons – something that Google itself has shied away from on ethical grounds.

4 mins read
AppleMagazine
AppleMagazine #488

GOOGLE FIRES AI MANAGER WHO PROTESTED HER PEER'S DEPARTURE

Google has fired a leader of its artificial intelligence ethics team in the fallout from the recent departure of another former employee involved in the same field.

1 min read
AppleMagazine
AppleMagazine #487

INVESTING ABCS: TEACHING YOUR KIDS ABOUT MONEY AND MARKETS

The recent stock market mania over the video game company GameStop, which this week was scrutinized by Congress, has provided a teachable moment for kids.

5 mins read
AppleMagazine
AppleMagazine #487

US LAUNCHES AEROSPACE CENTER AT TUSKEGEE UNIVERSITY

The U.S. Department of Defense has launched an aerospace education center of excellence at Tuskegee University in Alabama.

1 min read
AppleMagazine
AppleMagazine #487