Three Reasons Why the U.S. Economic Recovery can be Rapid

Three Reasons Why the U.S. Economic Recovery can be Rapid

There is no doubt that the Covid-19 pandemic has pushed the economy of the United States into a serious recession, ending the longest economic expansion in the country’s history. Since 2008, it has been one of the major economic downfalls of the country. Some indicators show that this recession may be different from all the crises in the past: a sharp decline in economic activity and employment, followed by a fairly rapid recovery.

There have been more than 4 million cases of the coronavirus in the US which is a huge number. More than 147,000 people died and the daily number of infected people only continues to grow.

However, the situation is not as hopeless as some may consider and there are three reasons that could contribute to the rapid recovery of the U.S. economy.

The first is that the US economy has entered this recession in very good shape with the level of consumer and business confidence, as well as employment levels at record levels or close to it. The expansion that preceded the recession was the longest in the country’s history. There were no visible and obvious imbalances usually associated with later stages of economic growth.

Downturns and Rebounds

For example, the last two economic downturns followed large bubbles in the housing and technology sectors. The banking sector, which was severely affected during the last recession due to the impact on housing, remains in excellent shape with sufficient capital reserves to cover the cyclical losses that usually occur during recessions.

While we are talking about technology sectors, the digital industry is actually the main tool that can boost the economy of the United States. Considering how Covid-19 changed the situation in the world, a lot of people moved to the online sphere. Even now, when in some of the countries restrictions have been eased, people find it more comfortable to do everything from home. The obvious example of that is Netflix, but it is also interesting that online casinos have seen a huge surge in customers. Gambling is constantly attracts a lot of customers but during the lockdown the number of people surged drastically.

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But the United States is not taking advantage of the situation, instead focusing on things like industry and manufacturing. Many lawmakers and senators have already pleaded with the government to legalize online gambling in several states to somehow subsidize the massive loss of GDP across the country. Many of these senators are using India as an example. Well, more specifically the few Indian states that allow gambling at least. The economic “relief” that the Indian gambling market has provided for the government after the lockdown is just unignorable. Massive surge in job positions, as well as a bump to salaries, thus prompting many Indians to spend more within the economy. The US senators are pushing an adoption of familiar casino games at the very least. The most prominent of these are online roulette for real money and sports betting. This is further reinforced by significant economic growth in states that do allow these casinos to operate, thus adding more legitimacy to the argument.

The technology sector has become the jewel of the U.S. economy, distinguishing the country from all other developed economies. In fact, many U.S. technology companies, such as Alphabet, Facebook, Amazon, Netflix, and many others, have played a crucial role in ensuring that everyone is involved and working within the framework of home isolation policies.

The second reason is that is not a “normal” recession, which came as a result of the imbalance of the economy or the actions of the Fed. External shocks can also lead to “normal” recessions, such as those experienced by the Western world after the “oil shock” of the early 1970s, or as a result of wars or other armed conflicts.

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The Covid-19 pandemic is an external shock that is unique and unprecedented, the last such disaster happened to us just a century ago.

Sacrifices have Already Been Made

The technical shutdown of the economy pushed it into recession, but it was a necessary action to slow the spread of the virus. Since most States are at different stages of their economy, we can expect economic activity to gradually resume. From this point of view, July will be better than June, and June is better than May.

The pause, which has arisen in isolation at home for the past two months, has taught us how to navigate this virus-infected environment. Therefore, normal economic and human activity will resume in the coming days, even though the exact treatment has not been found and the vaccine has not yet been finalized.

The third reason is the political response, which was unprecedented, both in terms of size and scope. The actions of the US Congress, treasury and the Fed ensured that short-term liquidity problems did not become systemic payment problems that would have hindered the economy for a long time.

Congress will likely need to do more in the coming weeks and months. But the attitude of the U.S. authorities to this issue does not allow doubt.

Full normalization of economic processes is expected only after the US receives a vaccine or medicine in the absence of any economic restrictions in the field of recreation, hospitality, and transportation. Thus, it can be predicted that the US economy and the labor market may return to pre-COVID levels this year.

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