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Economic Recoveries are Like Alphabet Soup

May 4, 2020

Economic recoveries often tend to take letter shapes on a graph.

A V-shaped recovery is the best-case scenario. When that happens, recovery is as fast as the decline – hit the bottom and quickly back to business.

U-shaped recoveries are middle of the road. There’s a flat stretch of time at the bottom followed by a vertical return to normalcy at the end.

The third common letter-shaped recovery is an L. This one is the toughest road and takes the longest. There is no vigorous bounce-back at all. Rather, the bottom of the L stretches out over multiple quarters or years.

Obviously, people are hoping for the V right now. They think since the market has “bounced back” that the economy will quickly follow suit once the country “opens back up.”

Sure, anything is possible. We could come up with a COVID-19 vaccine tonight. But as I see it, the odds of a V-shaped economic recovery are about as likely as a Florida snowstorm in the middle of August.

Here’s why – there’s all kinds of happy talk about getting out of this quickly, but the numbers simply do not add up.

Look at the restaurant, retail, and tourism industries. Those industries account for 73.4 million jobs, or 47 percent of all jobs in the U.S.

Restaurants lost 417,000 jobs in March alone. Retail lost 46,200, while Tourism is expected to lose 3.6 million jobs in the first quarter of 2020.

Now, these are the hardest-hit industries by the pandemic. But other areas of the economy are hurting too. The extent of the damage will be severe.

Many of these declines could be long-lasting. I mean, when is the next time you’ll see airplanes packed with travelers?

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