Mark Zandi joins DoubleLine’s Jeffrey Sherman and Samuel Lau to discuss, among other topics, if June’s recovery means an end to the recession, what shape the next federal fiscal package might take, the fallout from layoffs possibly spreading into higher-wage jobs and the economic outlook for the second half of 2020. Mr. Zandi is the Chief Economist for Moody’s Analytics. The podcast was recorded June 25, 2020.
Mr. Zandi says a June end to the recession would make the three-month recession the shortest on record as the typical recession lasts nine months. But, Mr. Zandi notes, it would also be the most severe, with a peak-to-trough decline in GDP on a monthly basis of 12% to 14%, contrasting to a peak decline of 4% during the Global Financial Crisis. And while he says that he did feel the long post-Global Financial Crisis expansion was leading to the preconditions for a recession, with the chances for one in 2020 likely, the COVID-19 blow to the economy was unprecedented.
Messrs. Zandi, Sherman and Lau speculate on what further fiscal aid might be coming from the U.S. government, with the Federal Reserve having firmly passed the baton to Congress. Mr. Zandi says three things need to happen: The package has to be at least $1 trillion, with his number rising in the face of the re-intensification of COVID-19; it has to happen before the August congressional recess, with the $600 boost to unemployment insurance set to expire at the end of July; and half of that $1 trillion has to go to state and local governments.
Mr. Zandi says housing has held up remarkably well in the pandemic, bolstered by the government agencies. The other surprise is the stock market, supported by the performance of very large companies. He sees one of the longer-term impacts of the pandemic being the concentration of business activity into the hands of fewer companies across all industries. “The stock market is now a market for winners,” he says.
In terms of risks for the second half of 2020, Mr. Zandi sees the continuing lack of leadership in handling the pandemic as incredibly disconcerting. He also expects November’s presidential election to be “really ugly,” with COVID-19 impacting voting procedures and a nightmare scenario playing out if there is no clear winner on election night.
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