Current Economic Situation, COVID-19, 4/30/2020

Next week, May 3-9, is Hurricane Preparedness Week. Weather analysts expect this to be a bad year for hurricanes. It’s a bad year for a bad year. The coronavirus complicates evacuation and sheltering plans, and some experts believe the combined effects of COVID-19 and a hurricane would be immense. It seems somewhat strange to think about planning to evacuate the coast when we’ve been hunkered down at home for the past six weeks. On the other hand, I live further inland and can totally picture myself waiting out the rain much as I’m waiting out the COVID storm (but with intermittent electricity). It is also interesting to think about stocking up on storm supplies when we still face shortages of some supplies due to COVID-19. The ongoing dearth of toilet paper and Lysol may have encouraged us to plan ahead. Take a look at preparedness kit instructions and consider the need to have items on hand. Visit https://www.txready.org/ and https://texashelp.tamu.edu/ for information on preparedness for hurricanes and other types of disasters.

Figure 1 BEA Image. (https://www.bea.gov/news/glance)

 

The Commerce Department released an advance report of first quarter 2020 GDP on Wednesday, indicating U.S. GDP shrank by an annualized 4.8 percent. The Congressional Budget Office and other analysts expect GDP to decline further in the second quarter of 2020 before beginning to rebound.

Figure 2 Wall Street Journal image. (https://www.wsj.com/articles/first-quarter-gdp-us-growth-coronavirus-11588123665?mod=hp_lead_pos1)

It is probably no surprise that consumer confidence dropped in the latest release of the University of Michigan Index of Consumer Sentiment. Interestingly, expectations are more stable than are current conditions. Other studies have found similar expectations. Experts interviewed in a NYT article speculate as to whether people just think things can’t get worse or see the reopening of state economies as a positive signal.

Figure 3 Wall Street Journal image. (https://www.wsj.com/articles/coronavirus-prompts-record-souring-of-consumers-outlookand-hope-pain-will-be-short-lived-11588101371)

Citing concerns about meat supplies available to U.S. consumers, President Trump issued an executive order help meat and poultry plants continue operations. Pork slaughter capacity is reported to have decreased by 25% and beef slaughter capacity by 10% in the past two months. This could improve farmers’ and ranchers’ ability to sell their livestock, but workers and unions are concerned about employee health in the plants. Milk, eggs, and vegetable producers are destroying product.

 

Figure 4 Wall Street Journal image. (https://blogs.wsj.com/economics/2020/04/29/newsletter-economy-contracts-confidence-plunges/?guid=BL-REB-39783&dsk=y)

As Texas begins the process of reopening its economy (rules as of 4/28 here), business leaders, employees, and consumers are all considering whether it is safe to venture out in various settings. Workers across the U.S. and Texas are also weighing whether their unemployment benefits exceed the wages they will receive back at work. The Texas Workforce Commission is considering whether Texas workers can still qualify for unemployment benefits if they refuse to return to work based on health concerns. Larger unemployment benefits during the pandemic and ongoing health concerns could combine to slow economic recovery. It’s not clear how Paycheck Protection Program recipients’ loan forgiveness will be affected if employees can opt not to return to work.

Interesting reads:
We’ve been hearing about milk dumping, but stored beer is also going bad.

About Rebekka Dudensing

Dr. Rebekka Dudensing is an Associate Professor and Extension Economist - Community Economic Development with Texas AgriLife Extension and Research in the Department of Agricultural Economics at Texas A&M. Her research interests include the evaluation of economic development opportunities, taxation and public/private goods issues, entrepreneurship, and regional economic cooperation.
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