Steady U.S. economy takes a dramatic nosedive
WASHINGTON — Three weeks ago, EmpireCLS was heading toward a second straight year of record business. A car service company in New Jersey, Empire couldn’t even find enough chauffeurs and office workers to meet its needs.
Now? With stunning speed, business in the United States — as well as in Europe and elsewhere — has collapsed in the face of the coronavirus and warnings for everyone to stay home. Suddenly, no one needs a chauffeur.
“We went from full throttle to 90% revenue loss in three weeks,“said Empire CEO David Seelinger. “We’ve been through 9/11. We’ve seen recessions. We’ve never seen anything like this.”
Mr. Seelinger spent last Sunday laying off 750 of his 900 employees.
“It was the most difficult day of my career,” he said.
Never before has the U.S. economy screeched to such a sudden stop. Its shutdown has inflicted a case of whiplash on Americans who had enjoyed years of gains from the job market, the stock market and a steady economic expansion. The economy is cratering into what looks like a deep recession. Millions will likely lose jobs by summer.
“The economy has never gone from healthy to disaster so quickly,” said Jason Furman, who was President Barack Obama’s top economic adviser and is now a professor at Harvard’s Kennedy School.
“In the financial crisis,“Mr. Furman noted, “the housing bubble burst in 2006, the first financial tremors were in 2007, and the major financial events were spread out from February through September of 2008. What would take years in a financial crisis has happened in days in this health crisis.”
Since the Great Recession ended in 2009, the economy has risen for a record 11 years. It hasn’t exactly been a boom. Annual growth has averaged a decent but unspectacular 2.3% since 2010. Yet the expansion has been solid and durable. Employers have added jobs for 113 straight months, the longest such streak on record.
Just two weeks ago, the government delivered a blockbuster employment report: a healthy gain of 273,000 of jobs in February, and a 3.5% unemployment rate, a 50-year low.
What’s more, public confidence was up. Consumers were spending. Incomes were rising. Layoffs were rare.
In just a couple of weeks, it’s all ended with the shutdown of most business activity nationwide. Goldman
Sachs expects the economy to shrink at a sickening 24% annual rate in the AprilJune quarter. That would be, by far, the worst quarterly drop on record. Just days before, Goldman had projected a 5% annual drop in that period.
This week, economists say the government could report that up to 3 million people applied for unemployment benefits last week, which would easily set a record. IHS Markit predicts 7 million job losses from April to June and for unemployment to shoot to 8.8% by late this year. Other economists see joblessness going much higher than that.
“I’m not sure that anyone honestly has any sense of how this ultimately resolves and on what sort of timetable,” said Daniel Feldman, a former U.S. diplomat who counsels corporations for the law firm Covington & Burling.