A milestone of misery has just been reached in the United States. The Covid-19 pandemic has now claimed more than 100,000 lives in the U.S., and the country’s Labor Department has issued a weekly jobs report showing another 2.1 million Americans have filed jobless claims. This means that in the last 10 weeks, more than 40 million American workers have lost their jobs.
In addition to the above grim statistics, the U.S. Q1 economic report has been revised, showing a higher level of economic contraction of negative 5%. However, this is a mere harbinger of what is to come. The Q2 economic report is forecast by several experts to reveal a contraction of between 20 and 40 percent.
The bad economic news in America is being replicated globally. Virtually every major economy has witnessed an economic shutdown based on combating the coronavirus. The result has been economic suicide in numerous countries. We are clearly already in a severe recession, far worse than the Global Financial Crisis of 2007-09. Increasingly, we are entering a global economic depression, the Global Economic Crisis of the 2020s.
In an interview with the CBS news magazine 60 Minutes, the Fed Chairman warned that the American economy could “easily” contract by 30 % in the current quarter. He also told the interviewer that the U.S. unemployment rate could peak at 25 %.Though the Fed chairman tried to put a positive spin on his message, using such rhetorical phrases as his “never bet against the American economy,” the reality Powell presented minus the spin was anything but rosy.
Even the Fed chairman’s prediction that economic growth would resume in the second half of 2020 was conditioned by developments on the health front, and that a full economic recovery required the development of an effective Covid-19 vaccine.
The Federal Reserve is clearly worried about a full-blown depression, a prospect that is increasingly likely. In fact, there is a growing consensus that a possible short-term recovery will be followed b y a sustained economic depression, transforming the global health crisis engendered by the coronavirus into the Global Economic Crisis of the 1920s.
Political scientist and noted global risk expert Ian Bremmer, who is president of the consultancy firm Eurasia Group, in a recent podcast indicated that in his view the world is now headed into a severe economic depression. He indicated in his podcast that while a uniform formal definition of an economic depression does not actually exist, the statistics of economic destruction emanating from the Covid-19 pandemic exceed the parameters of a recession.
Ian Bremmer pointed out in his podcast that a technical recession is defined as two quarters of consecutive negative economic growth. A depression would mirror the coronavirus pandemic in that it has far greater depth and duration than a normal event. The global health emergency generated b y Covid-19 has resulted in a level of economic shutdown and contraction throughout the world that far exceeds the formal definition of a technical recession.
Though there is resistance at the early stages of this new Global Economic Crisis to label it a depression, Bremmer points out that there was also hesitation towards labeling the coronavirus outbreak a pandemic in its early phases. The noted political scientist is convinced that we are entering the first new economic depression in nearly one hundred years. Ian Bremmer also believes the world of the 21st century is stronger financially and economically than was the case with the Great Depression of the 1930s. This is the only positive insight he offered, in what was otherwise a prediction of economic doom and gloom.
The just-released U.S. Labor Department report shows an addition 3.17 million American workers filed jobless claims in just the past week. This means that in a period of only seven weeks the U.S. shed 33.5 million jobs due to the Covid-19 pandemic. The employment picture in the United States is utterly dismal, with no end in sight to the contraction of employment numbers. Though there is wishful thinking on “reopening” the American economy, the reality on the ground shows freefall economic collapse engendered by a health crisis, with no short-term-term solution in sight, except continuation of the slowdown of economic activity.
The news from Europe is equally dire. The Bank of England is forecasting that the UK economy will contract in 2020 due to shutting down economic activity in response to the coronavirus by 14 percent. According to the Bank of England, this is the nation’s worst economic contraction in three hundred years. In the Eurozone officials forecast a rate of quarterly economic contraction of 7.5 percent.
A global recession is already underway, at an intensity far beyond that of the 2007-09 Global Financial Crisis. The current Global Economic Crisis created by Covid-19 suggests that a severe global depression is an increasingly likely prospect for the world.