The coronavirus pandemic has disrupted life completely. Through multiple lockdowns, many nonessential businesses were closed. Since then, some have shut for good, and millions of people are still out of work. All of this, of course, has taken a hit on the gross domestic product (GDP) as well.
Although vaccines are available and being distributed to healthcare and other essential workers, there is still a long road ahead to get everyone’s daily life and the overall economy back to where they were before the coronavirus crisis began. GOBankingRates spoke to financial experts back in April to find out how long they expected it would take for us to bounce back. See if their predictions for bouncing back have come to fruition and what it will take to make that happen during these hard times.
Last updated: Jan. 7, 2021
It Could Take Over a Year for Employment Numbers To Rebound
Paul Miller, CPA and founder of the accounting firm Miller & Company LLP, handles clients with revenues in excess of $250 million and has been cited as an expert by Fox Business. He predicts that it will take at least a year for employment numbers to go back to pre-coronavirus pandemic levels.
“I do not see employment going back to normal for over a year or more,” he said. “A lot of companies will file for bankruptcy.”
Adam Enfroy, digital marketing influencer, said in July that an uptick in employment will be required for the economy to bounce back.
“Economic recovery could take more than a year due to new headwinds in the government’s most recent monthly jobs report,” he said. “As coronavirus cases surge, reopening plans become unpredictable. While the S&P 500 can survive this prolonged volatility, it’s much harder on the average worker. Even with the U.S. adding 4.8 million jobs in June, 3 million more became permanently unemployed. [To me], early signs of recovery don’t include a surging stock market, but instead sustained, predictable improvements to jobless rates and consumer spending.”
GDP and Consumer Spending Will Rise Again Once People Have Their Jobs Back
“If people feel comfortable and have their jobs back within a year, you could see the GDP back to normal,” Miller said.
Consumer spending also depends on job security, he added.
“People are still spending — the question is when will discretionary spending take place,” Miller said. “This will depend on the job market. If people feel safe and are comfortable with their job, they will spend money. If they do not, this will slow spending.”
It Will Be 6 to 8 Months After the ‘War on COVID-19’ Is Over Before the Economy Takes a Positive Turn
William A. Stack is a financial analyst and author of “The 7.0% Solution.” He is a certified financial fiduciary, a retirement income certified professional and the founder of Stack Financial Services LLC in Salem, Missouri.
“It will likely take at least six to eight months after the ‘war on COVID-19’ is declared won before the economy and life as we knew it will begin to return,” he said. “While we will have growth in the stock markets happening before that, it may be several years before previous highs are reached again. But there will be plenty of money to be made for those able to commit some capital to the markets during the current downturn.”
The Economy Won’t Recover Until There Is a Vaccine or Treatment
Mark Zandi, the chief economist of Moody’s Analytics, told Kiplinger that recovery “won’t kick into gear until they find a vaccine or a medical treatment that is effective for the virus. Until that happens, I don’t see people traveling, global trade will struggle and businesses, weighed down by uncertainty, won’t invest or hire aggressively. We’re in the soup, more or less, until we have some solution to this virus.”
Entrepreneur and investor Phil Stover agreed with this prediction.
“This pandemic has taught us that the stock market is now totally detached from Main Street,” he said in July. “So while the market itself may do well on optimism, there cannot be a full economic bounce-back until we have a COVID vaccine and the majority of people and small businesses can return to their normal lives. I think we are 12 to 18 months away from that reality, unfortunately.”
On the plus side, Zandi believes that when there is a solution for the coronavirus, the economy will bounce back quickly.
“If we solve the virus, we’ll quickly get our groove back,” Zandi told Kiplinger. “There will be pent-up demand, and interest rates will be low. Assuming the finance system is not taken out, we’ll see a period of good strong growth in the second half of 2021 going into 2022 — as long as the script for a vaccine holds true.”
An Increase in B2B Spending Will Be the First Sign of Economic Recovery
Jim Swift is the founder and CEO of business information and risk management platform Cortera, which collects data from major companies across the U.S. to predict unemployment trends, financial health and other economic patterns. He has seen an increase in late payments and a decrease in spending by businesses since the pandemic started.
“Spending decreases are across all industries, with hospitality, educational services, information and retail trade impacted the most,” Swift said. “When the economy begins to recover, the first sign will likely be the transition from decreasing to increasing B2B [business-to-business] spending. That will indicate that businesses are starting to invest in growth and should also mean new jobs.”
He notes that “not all industries will increase spending at the same time. New job creation and reductions in unemployment rates will reflect each industry’s gradual return to increased spending, which should also indicate its rate of new job creation.”
The Economy Will Stabilize in the Third Quarter of 2020
Gus Faucher, chief economist at PNC Financial, told CNBC in April that the economy will stabilize in the third quarter and then close with “stronger” growth at the end of 2020. Faucher may have been a little too optimistic. Although the economy has been improving, it’s still not back to where it was before. Unemployment levels are close to where they were during the worst part of the Great Recession, the Brookings Institute reported.
“The longer this lasts, the greater structural damage it will do to the economy and the weaker the recovery will be,” he added. “It’s going to be small business [that will suffer the most]. They have the fewest resources to fall back on. Many of them are already operating at the margin. They’re the most vulnerable.”
This part of his production rings true. A National Bureau of Economic Research study projects that more than 100,000 small businesses will close permanently as a result of the coronavirus pandemic.
Jobs Will Return Once the Coronavirus Is Defeated
K.C. Mathews is executive vice president and chief investment officer at UMB Bank. He expected unemployment numbers to spike before going back down again.
“Hopefully, fiscal stimulus packages will protect employees, keeping incomes close to previous levels. We remain hopeful that many of those job losses could be reversed quickly once the virus is brought under control — after all, the surge in the number of unemployed was due to temporary, rather than permanent, layoffs.”
Unemployment did spike in April. And as businesses began to reopen, unemployment dropped in May and again in June.
The GDP Will Rise in the Fourth Quarter of 2020 — but Will Still Be Lower Than Before
“We expect a material contraction in the second-quarter GDP, down 15.5%, an improvement in the third quarter, still -0.5%, and a recovery in the fourth quarter, a positive 3.2%,” Mathews said. “That will bring 2020 real GDP to -1.8%. These estimates could be conservative.”
So far, we know the GDP decreased 5% in the first quarter of 2020, according to the Bureau of Economic Analysis.
Mathews said that the duration of shelter-in-place orders will have a direct effect on the GDP.
“The longer shelter-in-place orders stand, the deeper the economic contraction,” he said. “We are suggesting an upward sloping ‘L’-shaped economic recovery. We think it will take time for consumer confidence to return. A vaccine will help instill confidence.”
Mathews also noted that some industries will take longer to bounce back than others.
“Certain industries, such as hospitality and leisure, may have a longer recovery period, even after the so-called ‘all clear,'” he said.
The hospitality industry is indeed still floundering, and new projections are indicating that hotel demand will not return to pre-pandemic levels until 2023, CNBC reported.
Consumer Spending May Be Changed Permanently
There a number of factors that will affect when consumers start spending as they did before — but even if spending returns to pre-coronavirus pandemic levels, the way people spend their money could be forever changed, Mathews said.
“We believe the consumer is looking for four things: 1) the number of new COVID-19 cases peaking, 2) no resurgence of COVID-19 cases globally as economies open up, 3) a COVID-19 vaccine and 4) unemployment rate to stabilize,” he said. “Even after that, consumption may be muted and our consumption behaviors may change: how we grocery shop, how we vacation, etc.”
So far, Ken Chen, co-founder and managing partner at Narrative, has seen consumer spending bounce back in the e-commerce sector.
“As an advertising agency, Narrative has seen a revenue bounce for our e-commerce and direct-to-consumer clients that now exceed pre-COVID levels,” he said in July. “So there are already signs that the economy is starting to bounce back, but the distribution is going to look very different.”
Kristy Rampton, founder at Buttercup, has particularly seen a shift in how families are spending their money.
“With school uncertain, there has been more of a focus on home education and entertainment versus school clothes and supplies,” she said in July. “This may continue for some time if school does not return to normal.”
The Stock Market Will Remain Volatile for the Foreseeable Future
“After a ‘shock’ and/or a recession, the stock market goes through a bottoming process,” Mathews said. “In numerous historical cases, the process takes time. The outbreak of COVID-19 caused the swiftest transition from a bull market to a bear market. In approximately 30 days the stock markets retreated by 34%.”
The stock market has remained volatile.
“History tells us that the stock market will go through a process,” Mathews said. “Monetary and fiscal stimuli are in place, but now we will analyze the economic data. How many people will lose their jobs, and for how long? How severe will the GDP contract, and for how long? What will happen to consumer confidence? As economic data is released, we will see volatility in the markets.”
It Will Take 6 Months to a Year To Bounce Back
Mark Spitz is a fintech entrepreneur and the CEO of CPI Inflation Calculator, a free inflation rate calculator powered by the Bureau of Labor and Statistics’ monthly Consumer Price Index updates. He believes it could take “six months to a year for everything to get back to normal.”
“Businesses depending on other small businesses will have to suffer for one or two quarters,” he said. “The travel industry will probably suffer for the next five years. We also need to get through one or two quarters for employment numbers to pick back up again, but it will probably take up to 18 months to two years for it to be back where it needs to be. It takes about a year and a half to get through a recession if you look back at history.”
We Will Be Fully Recovered in a Few Years
Former Federal Reserve Chair Ben Bernanke is optimistic that the economy can make a full recovery from the coronavirus crisis.
“The U.S. economy will recover and within a few years will show only modest marks of this experience,” he said in a Brookings Institution online event, Reuters reported.
Bernanke noted that the speed at which the economy recovers will depend on how quickly we can get the virus under control. He also said that there will be permanent changes, with some small businesses closing permanently and the travel industry evolving as well.
The transition period will be a “very very tough and scary period,” he said, but, “if all goes well, in a year or two, we should be in a substantially better position.”
It Could Take Over 18 Months for the Market To Recover
Mislav Matejka, head of global equity strategy at JPMorgan Chase, said in a research note that the global economy could experience “a vicious spiral, which is typical of recessions, between weak final demand, weaker labor markets, falling profits, weak credits markets and low oil prices,” MarketWatch reported.
The GDP in Western economies is largely dependent on consumer spending, so the loss of jobs will have a ripple effect, he explained.
“While consensus view still appears to be a quick recovery, recessions tend to linger,” Matejka said. “It took equities on average 18 months to record the final low in the past.”
The Recovery Will Happen in Three Stages
Jason Furman, a former top economist for President Barack Obama, told Vox the economic fallout and recovery will likely have three stages. Those stages are:
- Contraction: This was the first phase, with people losing their jobs, business investments dwindling and consumer spending decreasing.
- A partial bounce back: This will come when things begin to reopen. He predicts that although there will be a lot of hiring, spending and investing, it will not bring the economy back to where it was in January 2020.
- The long slog: It could take a long time for employment and wages to recover to precrisis levels.
A Full Recovery Won’t Happen Until Early 2021
John Chambers, former CEO of Cisco Systems, venture capitalist and advisor to multiple startups, told MarketWatch that the next nine months to a year will be a tough stretch for the economy. He predicts that the economy won’t be on the upswing again until at least late fall, with a full recovery unlikely until early 2021.
Although Many Businesses Will Crumble, This Could Be a Boon for Innovators
Chambers believes the health crisis could reward companies who are innovative and adapt to the changing environment.
“Companies will either be destroyed or break away if they follow their north star,” he told MarketWatch. “It’s time to reinvent or be left behind. And remember, great tech companies have emerged during economic crisis.”
The companies that survive and succeed will have to be able to harness a remote workforce, Yenn Lei, head of engineering at Calendar, said in July.
“We see many businesses we are working with continuing to grow and thrive as they continue working remotely,” he said. “It’s certainly one of the most unique economic situations we’ve ever seen. For the entire economy to bounce back, however, it may take considerable time until more businesses figure out how to pivot or adapt to this new environment. It depends on the solutions that we can all come up with to ensure protection so that more businesses can re-open.”
It Will Take a Few Years To Get Back To Pre-Coronavirus Levels
Jesse Edgerton, an economist at JPMorgan Chase, told Vox that people are going to experience a recession before a recovery period. Edgerton was right — a recession did begin in February.
“The shock from the virus … is going to be enough to tip off at least a normal recession in the rest of the economy beyond these direct effects of the sectors that we have had to shut down. … We should expect the next nine months or a year to look like a recession, to continue to see high levels of unemployment and depressed levels of output,” he said. “It will be at least a few years before we feel as good as we did in January.”
It Will Take Longer for the Travel Industry To Return To Normal
Nariman Behravesh, chief economist at IHS Markit, told ABC News that the economy is unlikely to bounce back quickly and that the travel industry, in particular, could see a slow recovery.
“Anyone who assumes we’re going to get a sharp snapback in activity isn’t thinking about how consumers are going to feel. They’re going to be very cautious,” he said. “Households and businesses have seen their finances deteriorate.”
Behravesh noted that it took a long time for people to start flying again after the Sept. 11 terrorist attacks
“It took two and a half years for airline passenger traffic to go back to previous levels,” he told ABC News.
Airline traffic did start to increase in May, but it’s nowhere near pre-pandemic levels, NPR reported. Nate Nead, managing director at ROI.me, said in July that a recovery in the travel sector will be a good indicator of a broader economic bounce-back.
“The full economic recovery is not likely to return until we see a more complete recovery for airlines, travel, events and venue-specific locations,” he said. “A full GDP recovery is not likely until we can go to large concerts and theme parks without masks, fear and social distancing restrictions. Until then, we are likely to remain muted in our full potential from a GDP and economic perspective.”
The Virus’ Behavior Will Predict How Soon We Can Bounce Back
Dr. Wafa Hakim Orman, associate dean of the College of Business at The University of Alabama in Huntsville, said in a University of Alabama in Huntsville news release in April that it’s hard to predict when the economy will recover because so much about the virus’ behavior is unknown.
“As for when things can go back to the way they were, that depends on what happens to the virus in summer and fall,” she said at the time. “Does it behave like the 1918 influenza, which receded in summer and then returned with much greater lethality in the fall? Or does it gradually recede over time, like SARS and MERS did? At this point it is impossible to tell. It is so new that even the experts know very little about it.”
As it turns out, summer weather has not been able to significantly curb the spread of the virus, Scientific American reported.
The Effectiveness and Swiftness of Government Assistance Programs Will Also Affect How Soon the Economy Can Recover
“Congress and the Federal Reserve have put in emergency lending measures for businesses, but at least initially there are concerns about the amount available and the process to issue loans,” Orman said in the news release. “So, if there are widespread shutdowns and bankruptcies, the question arises about how long it will take for businesses to be in a position to hire. If the assistance is timely and sufficient then it should not take very long at all.”
Unfortunately, millions of small-business owners did not receive government loans, leaving them struggling to survive, CNBC reported. For those that did receive PPP, that support will run out soon.
“We still need to see what happens with the PPP running out, unemployment benefits dropping after July and what the government’s next move is,” Erik Huberman, CEO of Hawke Media, said in July. “I would anticipate a dip in August, and potentially a slower holiday season than predicted, followed up by a dip in Q1 because of missing the mark — and then a true recovery Q2 next year.”
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Employment Needs To Recover Before the GDP Can Recover
It could take some time for consumer spending to rise back up to pre-coronavirus pandemic levels, Orman said.
“Laid-off workers will still not be able to spend, and so their lack of consumption will continue to slow growth and recovery for a while until their jobs bounce back,” she said.
Fortunately, Mark McKee, president and COO at OnPay, said in July that he has already been seeing his small-business clients bringing back their furloughed workers.
“We’re seeing clients begin to hire again and bring their teams back,” he said. “Another encouraging trend is that people are using this time to pivot and start a new business. Overall, we expect to see continued steady progress with things normalizing in three to four quarters.”
A Rapid Recovery Could Begin This Summer
David Donabedian, chief investment officer of CIBC Private Wealth Management, told MarketWatch that the economy could begin to recover this summer. Although the economy has been showing signs of gradual recovery, the rise in the coronavirus cases could put the economy on a downswing again, Bloomberg reported.
The Global Economy Will Suffer for Years
Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development, told the BBC that many countries will take a long time to recover economically from the coronavirus pandemic, stating that the fallout could last “for years to come.”
“Even if you don’t get a worldwide recession, you’re going to get either no growth or negative growth in many of the economies of the world, including some of the larger ones, and therefore you’re going to get not only low growth this year, but also it’s going to take longer to pick up in the in the future,” he said.
Gurría does not believe we will see “V”-shaped economic recovery — a steady decline followed by a steady return.
“I do not agree with the idea of a ‘V’-shaped phenomenon,” he said. “It’s going to be more in the best of cases like a ‘U’ with a long trench in the bottom before it gets to the recovery period.”
We Could See a Bounce Back in the Third Quarter of 2020
Sal Guatieri, senior economist at BMO Capital Markets, told MarketWatch in April that the success in containing the virus that other countries have experienced is a good sign for the future of the U.S. economy.
“Some countries have proven that if you take precautionary measures, such as social distancing, you can get in front of this virus and contain it or at least slow it down,” he said, noting that if the U.S. response is effective, “we think we will see a nice bounce-back in the third quarter.”
Unfortunately, the U.S. has been unable to contain the virus as well as countries in the E.U., with numbers in the U.S. trending upwards compared to more stagnant numbers in Europe, Newsweek reported. It seems that given this, Guatieri’s prediction was a little too optimistic.
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Jaime Catmull contributed to the reporting for this article.