The 'D' Word: Top Economists See Some Echoes of Depression in U.S. Sudden Stophttps://www.bloomberg.com/amp/news/articles/2020-03-22/top-economists-see-some-echoes-of-depression-in-u-s-sudden-stopThe U.S. is entering a recession. The ultimate fear is that could turn into a protracted malaise that has some flavor of a depression.
As business activity halts and layoffs surge, some prominent economy watchers -- including former White House chief economists Glenn Hubbard and Kevin Hassett and former Federal Reserve Vice Chairman Alan Blinder -- have drawn comparisons to the Great Depression, though they’ve stopped well short of forecasting another one.
Former International Monetary Fund chief economist Maury Obstfeld said the world hasn’t seen a synchronized interruption in economic output in decades. The best example the University of California, Berkeley, professor can think of: “Well, maybe the Great Depression.”
By some estimates, the economy is headed toward its worst quarter in records since 1947. JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period while Bank of America Corp. and Oxford Economics both see a 12% drop. Goldman Sachs Group Inc. sees a 24% plunge.
Whether the coming contraction proves to be prolonged depends a lot on how long it takes to check the contagion.
“Unless this virus miraculously disappears from the population over the course of the next few months, it is a reasonable scenario that we might be in this lockdown setting for quite a while, measured in quarters,” said Harvard University professor James Stock, who is a member of the National Bureau of Economic Research panel that dates the timings of recessions.
If everybody stays home for six months, “it is going to be like the Great Depression,” Hassett, who’s returning to the White House to advise on economic matters, told CNN on Thursday.