The Top Line

• There are key differences to consider between the COVID-19 pandemic and past recessions. As doctors put patients into comas to save lives, so too must the economy be sedated to save lives. 

• Charity, integrity, and interest rates are powering the economy through COVID-19. 

• The U.S. government is busy at work creating the conditions for the U.S. economy to bounce-back and prosper once it arises from its slumber. 

Coma vs. Calamity: COVID-19 Pandemic and the Great Recession

Many commentators have been comparing the economic effects of COVID-19 to the Great Recession that began in late 2007. Though the Great Recession may be nearest comparison in living memory, the resemblance is surface level at best. 

• During the calamity of the Great Recession, serious structural damage was done to the vital systems of the economy. The decline in GDP trended steadily ever downwards until reaching its trough in the middle of 2009 (orange line above). 
• In contrast, the COVID-19 pandemic has prompted the government to put the U.S. into an economically induced coma to flatten the virus's curve and save lives. The vital systems of the economy are functioning, but at a reduced capacity. 
• As a result of this coma, weekly jobless claims have increased dramatically. In a sign of increasing unemployment, the U.S. Bureau of Labor Statistics reports an increase in the most commonly cited U-3 unemployment rate from 3.5% in February to 4.4% in March. The broader U-6 rate, which includes underemployed workers who would take more hours if available and workers seeking employment in the last year who've yet to find a job, increased from 7% in February to 8.7% in March. 
• Despite rapid downward trend associated with the COVID-19 coma, when the coma ends, a rapid return to healthy functioning - the often mentioned V-Shape or Nike Swoosh - is expected by many (blue line above). 

A Ton of Pluck and a Bit of Luck

The U.S. government's reaction to the COVID-19 pandemic has been large, swift, and without peacetime precedent. With concern for their fellow citizens, Americans across the country are rising to the occasion. 

• The COVID-19 pandemic struck at a time of historically low U.S. interest rates. Financing the large scale government relief spending is relatively cheap compared to times past, with borrowing costs for the U.S. government to finance those expenditures about as low as they can get. 
• American manufacturers are retooling their production to make supplies to fight COVID-19. With distillers producing hand sanitizer, clothiers making personal protective equipment, and automakers making ventilators. 
• Organizations across the country are working to keep people most vulnerable to COVID-19 safe while keeping them connected to others and with a delicious meal. 

Myth vs. Fact

• MYTH: During the Great Recession that began in 2007, the American taxpayer lost money on the funds the government injected into banks and other firms that would have destroyed large swaths of the U.S. economy if allowed to fail. 

• FACT: As of March 2020, the Federal Government has netted a profit of $121 billion from the monies used to save the U.S. economy during the Great Recession. Though it was never the purpose of the Treasury to turn a profit, the rescue returned billions to taxpayers. 

Just What the Doctor Ordered

After federal and state governments required businesses to close their doors and workers to stay home, the U.S. was put into an unprecedented economically induced coma. In response, the federal government has initiated a similarly unprecedented round of fiscal and monetary support for the U.S. economy to keep the vital organs of the economy functioning. 

• President Trump signed the $2.2 trillion Phase III coronavirus response legislation into law, which was in addition to the two previous measures (orange bars above). The measure expands unemployment for workers and creates bridge loan programs for the businesses they work for that were required to shut their doors due to COVID-19. 
• To keep the COVID-19 pandemic from turning into a financial crisis, the Federal Reserve has put on the gloves and begun a transfusion of much needed liquidity into the economy (blue line above). Its lending programs and asset purchases have done much to stabilize markets and tame the volatility seen last month. 

Disruption of the Week

HealthWeather.US

Smart technologies are helping pinpoint the next virus hotspots through real time health care data and filling the labor shortage gap as Americans stay home. 

• These smart, internet-connected devices, also known as the Internet of Things, have become so widespread in their use that the average American now owns 11 connected devices. 
• While many of these technologies are used to make our lives easier or preform menial tasks, for example a smart thermostat or smart vacuum, smart technologies are now being put to use in health care to collect instant nationwide data on the spread of COVID-19. 
• Data from smart thermometers, already being used to track flu outbreaks, provided some of the first signs of COVID-19 in areas where early testing was largely unavailable and is now showing that our social distancing measures are working to slow new infections. 
• In China, officials have also used smart glasses and smart helmets to screen for fever, and even built a smart hospital staffed entirely by robots. 
• As workers remain home, more and more companies are reverting to using smart technology to perform tasks that would have otherwise been done by humans. 
• This trend, which was already growing even before the outbreak of COVID-19, will only be exacerbated as we continue to practice social distancing and many companies turn to using smart technology as a full-time replacement for workers. 

Further Reading

• The current situation has led to an expansion of the government without historical precedent outside of wartime. There is a risk that the recent expansion in the government's boundaries will be a game of inches to roll back. The Economist.