Show an ad over header. AMP

Here comes the real recession

Economists are warning that the economic downturn caused by the coronavirus pandemic is now creating another recession: mass job losses, business failures and declines in spending even in industries not directly impacted by the virus.

Why it matters: The looming recession — a possible recession within a recession is less severe than the coronavirus-driven downturn. But it's more likely to permanently push millions out of the labor force, lower wages and leave long-lasting scars on the economy.


What we're hearing: "As the recovery has slowed down we’ve seen a couple of metrics transform from something that was extraordinary and unique and that we’d only seen in this COVID recession to something that is much more in line with our historic experience with typical recessions," Ernie Tedeschi, a managing director and policy economist for Evercore ISI, tells Axios.

The warning signs he sees:

  • The increasing number of layoffs that have gone from classified as temporary to classified as permanent.
  • The increasing number of men who have lost jobs in recent months, a traditional recession dynamic and reversal of the trend that saw more women being laid off in early months.
  • The rising rate of long-term unemployment, an unfortunate hallmark of the 2008 Great Recession.

"The longer this weakness persists the harder it is to recover later on," Tedeschi adds.

  • Darius Dale, managing director at Hedgeye Risk Management, tells Axios: "Our view is that the U.S. economy is transitioning from a depression to a recession and not a recovery."

But, but, but: It will be hard to see the recession in most data, because third quarter economic growth will be compared to the second quarter, which was the worst downturn in history.

  • Absent another wave of lockdowns, Q3 GDP growth should be the highest ever — but largely because of pent-up demand and the simple fact that most U.S. business are allowed to operate.

Be smart: The new recession is exactly what policymakers were trying to avoid by passing the $2 trillion CARES Act in March.

How it happened: "We had an uneven shutdown around the country and what that allowed the virus to do is really take hold and remain a force for economic outcomes," Constance Hunter, chief economist at consulting firm KPMG, tells Axios.

  • Hunter also serves as president of the historically right-leaning National Association for Business Economics, which recently released a poll of its members that found two-thirds believe the economy is still in a recession.
  • More than a third (37%) see a one-in-two chance of a double-dip recession — an occurrence that Hunter notes is "extremely rare."

The bottom line: The recession within a recession is giving economists flashbacks of 2008 and the long recovery needed to get many of the country's lower-income citizens back on their feet.

  • The difference this time is that it follows an economic shock that caused at least three times the number of job losses as 2008, and has put four times as many people on government unemployment insurance.

Anxious days for airline workers as mass layoffs loom

The clock is ticking for tens of thousands of anxious airline employees, who face mass reductions when the government's current payroll support program expires on Sept. 30.

Where it stands: Airline CEOs met Thursday with White House Chief of Staff Mark Meadows, who said President Trump would support an additional $25 billion from Congress to extend the current aid package through next March.

Keep reading... Show less

House Democrats ask DOJ watchdog for "emergency" probe of Durham's Trump-Russia investigation

Four Democratic House committee chairs on Friday asked the Justice Department's inspector general to launch an "emergency investigation" into whether Attorney General Bill Barr and U.S. Attorney John Durham, his appointee, are taking actions that could "improperly influence the upcoming presidential election."

Catch up quick: Last year, Barr tapped Durham to conduct a sweeping investigation into the origins of the FBI's 2016 Russia probe, after he and President Trump claimed that it was unjustified and a "hoax."

Keep reading... Show less

U.S. nutritional supplements retailer takes first step to sell to China’s Harbin Pharma

GNC Holdings, the Pittsburgh-based nutritional supplements retailer, received bankruptcy court approval to sell itself to China’s Harbin Pharmafor $770 million, although the deal still faces U.S. political pressures over how GNC customer data is protected.

Why it matters: It's a reminder that the U.S.-China merger mess goes well beyond smartphone apps, with Sen. Marco Rubio asking for a CFIUS review.

Keep reading... Show less

The cumulative climate change effects of Trump's regulatory rollbacks

Reproduced from Rhodium Climate Service; Chart: Axios Visuals

The Trump administration's scuttling or weakening of key Obama-era climate policies could together add 1.8 gigatons of carbon dioxide equivalent to the atmosphere by 2035, a Rhodium Group analysis concludes.

Why it matters: The 1.8 gigatons is "more than the combined energy emissions of Germany, Britain and Canada in one year," per the New York Times, which first reported on the study.

Keep reading... Show less

Boeing's dual crises: How the pandemic has deepened its 737 MAX crunch

The grounding of Boeing’s 737 MAX was the worst crisis in the plane-maker’s century-long history. At least until the global pandemic hit.

Why it matters: Wall Street expects it will be cleared to fly again before year-end. Orders for what was once the company’s biggest moneymaker were expected to rebound after the ungrounding, but now the unprecedented slump in travel will dash airlines’ appetite for the MAX and any other new planes, analysts say — putting more pressure on the hard-hit company.

Keep reading... Show less

New downloads of TikTok, WeChat to be blocked on Sunday

The Commerce Department issued Friday an order blocking new downloads of WeChat and TikTok in the U.S. as of Sept. 20.

The state of play: President Trump has been in a standoff with TikTok, threatening to ban the app if it's Chinese owner, ByteDance, does not relinquish control to a U.S. company. A deal is in the works with the American tech company Oracle, but would need to go through before Sunday to prevent TikTok from being ousted from app stores.

Keep reading... Show less

Michael Bloomberg unleashes $100 million "wall to wall" ad blitz to take down Trump in Florida

Mike Bloomberg's $100 millionFlorida blitz begins today and will continue "wall to wall" in all 10 TV markets through Election Day, advisers tell me.

Why it matters: Bloomberg thinks that Joe Biden putting away Florida is the most feasible way to head off the national chaos we could have if the outcome of Trump v. Biden remained uncertain long after Election Day.

Keep reading... Show less

Biden's hardline Russia reset

When he talks about Russia, Joe Biden has sounded like Ronald Reagan all summer, setting up a potential Day 1 confrontation with Russian President Vladimir Putin if Biden were to win.

Why it matters: Biden has promised a forceful response against Russia for both election interference and alleged bounty payments to target American troops in Afghanistan. But being tougher than President Trump could be the easy part. The risk is overdoing it and making diplomacy impossible.

Keep reading... Show less

Insights

mail-copy

Get Goodhumans in your inbox

Most Read

More Stories