It could take years for the world to recover from a significant economic contraction, and it will look different than the world we knew in January.
Recovering from the economic damage wrought by the coronavirus pandemic will come in incremental steps.
While the economic and social paradigms of the last decade are useful as reference points, the next few years will author new rules and standards. Allianz Global Head of U.S. Investment Strategy, Mona Mahajan, appeared on FarrCast and said as many as half of the 30 million unemployed people in the U.S. will be back at work in six to 12 months. She went on to say that it would be a few years before the U.S. might see a 3.5% unemployment rate again.
What will it take to move to the new U.S. social and economic paradigms? It will mean making peace with the notion that the world recovering from a significant economic contraction will look different than the world we knew in January. The contraction is still occurring. It is not complete. That's fact, not opinion. The numbers of those inflicted by the coronavirus are still increasing, and so is unemployment. The numbers are no longer skyrocketing, but neither are they yet coming down.
But it is important to note that throughout this process of recovery, there will likely be a dampening from all the debt that has been incurred during the downturn. Higher levels of consumer, business and government debt will, in some cases, inhibit consumption and investment. In other words, money that must be spent on debt service will not be available for more productive endeavors.
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