Virus Impacts an Economy Already in Decline before the Crisis
Virus Impacts an Economy Already in Decline before the Crisis by David Haggith for The Great Recession
The soup lines hadn’t formed yet. Jobs had not even noticeably started to dry up, but they weren’t as easy to find anymore. You had to be angry to quit without having a better job firmly in hand. Stocks were climbing furiously above an economy that had been slowly ebbing away since summer. Sales were down for months, so revenues were down for months, and profits were down. Funding in the world’s easiest credit market — interbank repos — was extremely tight — so tight the Fed had to come to the rescue every single day for months, and the problem was only getting worse.
Such were the times before COVID-19 struck the world in 2020 like an asteroid from some far reach of the solar system crumbling the walls that already sat on cracked foundations, burying in ash a partying world that hadn’t yet figured out it was already slowly dying from its own internal decay.
Archeologic evidence of a society already in decline
Now we are left to dig up a modern Pompei and piece together what life was like before the explosion of the viral impact event. What follows are the last statistics to come in from the days just before the earth-shattering crisis hit. These are the final numbers that foreshadowed a nation’s deep decline.
The leading economic index rose a slight 0.1% in February, but that was before the coronavirus began to bring U.S. growth to a standstill…. “It doesn’t reflect the impact of the COVID-19 pandemic which began to hit the U.S. economy in full by early March,” said Ataman Ozyildirim, director of business cycles research…. “As a result, the economy may already be entering into a period of contraction.”
Therein lies in the ash an encapsulated tale I’ve been telling of an economy that was already receding before the crisis hit. A rise so small implied a drop in GDP growth of almost 50%, which would have taken GDP growth down in the present quarter from its nearly yearlong stagnation at 2.1% to about 1% without any viral impact.
As one reader noted, in comment to that article,
This slight rise in leading indicators does not change the unfavorable trends in our economy that evolved over the last year (ever since the temporary, tax-cut boost to our economy wound down).
The fix was in, and it didn’t fix anything.
Services had also been in decline since mid-summer but plunged below the recession mark (50) in February of 2020 just as the coronavirus asteroid hit the US in the second half of the month: