Though large sections of the economy were effectively shut down for months to combat the spread of the pandemic, there are enough early indicators to show the first stages of meaningful recovery, according to Eisenberg. “Do not confuse this early recovery with a true ‘V’-shaped recovery. With autos and homebuilding, I think there will be a true ‘V,’ but it will not be everywhere.”
The first sector of the economy to provide the backbone to the forecast was automotive data.
Data from LMC Automotive shows a decent ‘V’ shaped upturn, while JD Power reports it may have new car purchases recover to pre-pandemic levels by August. “Automobiles are relatively like the harbinger of housing because they are a large [purchase] like a house,” he said. “This is a pretty good sign, but temper your enthusiasm.”
Another meaningful metric was restaurant traffic, up much higher since more venues opened up across the county. “I am more optimistic about it and believe the improvement is solid and real. This is a perfect example of suppression ending. This depends on a large extent how we psychologically feel about going to a restaurant.”
Other indicators that showed meaningful growth were manufacturing and hotels.
However, there are still many obstacles to overcome to increase the GDP to pre-pandemic levels. One problem is that firms are hesitant to invest along with a growing number of unknown factors along with the pandemic to consider–a trade deal with China, a second wave of the virus and the U.S. government’s response is pressing. Furthermore, Eisenberg cites publicly traded companies are suspending their dividends or reducing their dividends in levels haven’t seen since the Great Recession (2008-2009).
Chiefly among all other obstacles to GDP improvement is unemployment, Eisenberg emphasized. Estimates from the Wall Street Journal range from 20 to 30 million jobs lost due to the crisis. The U.S. Bureau of Labor Statistics’ June report shows a 13 percent unemployment rate. Due to calculation errors by the study, Eisenberg argues that the real number is closer to 16.3 percent.
“People who lost their jobs will have to find new jobs with new employers, and that is going to take time,” Eisenberg said. “We are not going to create 20 million jobs in a month. That is simply not going to happen. If we create 2 million, I’ll be very happy.” For reference, during the height of unemployment during the Great Recession, the unemployment rate was 10 percent.
Sustained recovery comes down to the government stepping up to secure households and support businesses to get back on their feet, he stresses. “Government spending has come to the rescue. There are no ifs, ands or buts about it. The government came out guns blazing here,” Eisenberg said. “Our economy was in a coma, and this kept us alive period while we were locked in our houses and didn’t have our jobs.”
More needs to be done to get the unemployment number down. “Even at 10 percent, we saw mass dislocations and a long, miserable recession. I’d like to think it would come down to 11 or 12 by the end of the year. This will still be worse than the last recession so congress has to come through with funding.”
Due to the low-interest rates at 0.125 percent, now is not the time to worry about the national deficit, he added. According to Eisenberg, the consequences of increasing the deficit will be nothing compared to the “ravages” of what the economy will endure without additional spending. “This is threat number one to our economy: Will congress come through, and how much will they come through with? They are going to help households get jobs and while they are unemployed. If they don’t come through and we go through this time of high unemployment in this 13 to 14 percent range, we are going to have a world of hurt in our economy.”
Eisenberg said he doesn’t see politics ultimately obstructing the recovery spending. “There is political will to do it, they are just fighting over what they want. They are going to figure it out, but they need to do it before the end of July. They do not have the luxury to be waiting.” If significant relief measures are taken, the recession will be relatively short and painful with a steady recovery, he said.
