The rise in unemployment and economic impact caused by the COVID-19 pandemic is being witnessed across both advanced and developing economies. While the full extent is yet to be ascertained, leading macroeconomic influencers are predicting that the stimulus packages announced by governments may not be enough.
Daniel Lacalle, an author and Chief Economist at Tressis SV, tweeted about the historic WTI crude oil price crash to below zero. Lacalle noted that commodities pricing is not experiencing a V-shaped recovery or a moderate recession, but pricing for a deflationary depression. He added that when supply chains are broken, the risk of stagflation is expected to appear.
WTI at $10.30. Nat gas ar $1.79.
Gold close to $1,700.
Commodities are not pricing a V-shaped recovery or a moderate recession. Commodities are pricing a deflationary depression, and once supply chains are broken, stagflation risk will likely appear.#OOTT pic.twitter.com/su9NwWccCh
— Daniel Lacalle (@dlacalle_IA) April 20, 2020
Stephen Koukoulas, an economist, tweeted that despite the stimulus packages announced by the Australian government, unemployment rate is still expected to reach 10% and under-employment at 10%-15%. Further, hundreds more businesses are expected to shut down.
Koukoulas added that although the stimulus packages seem big, they are still not sufficient to revive the economy.
Note that even with all the stimulus measures that Lowe & others are mesmerised by, unemployment is still on track to hit 10% with underemployment 10-15% with hundreds of thousands businesses folding.Just because the stimulus measures are 'big' they are not big enough #4Corners
— Stephen Koukoulas (@TheKouk) April 20, 2020
John B. Taylor
John B. Taylor, Professor of Economics at Stanford University, shared an article from the International Monetary Fund about how the COVID-19 induced depression is affecting both advanced and developing economies.
Growth in advanced economies is projected to be -6.1%, while emerging markets and developing economies are expected to have growth rates of -1.0% and -2.2%. The article adds that this is a global crisis caused by the pandemic, where no country has been spared from its impact.
— Ninja Economics (@NinjaEconomics) April 20, 2020
Gregory Daco, Chief US Economist at Oxford Economics, tweeted that aside from causing massive job losses, the COVID-19 pandemic is expected to result in a decrease in wages and number of hours worked.
Employers are applying for workshare programmes with state labour departments, which allow them to reduce work hours and avoid full layoffs. The programmes also enable employees to collect unemployment benefits.
Daco shared a graph from an article depicting the spike in number of workers claiming unemployment benefits through these reduced work hour programmes.
Beyond the massive job losses, the global #coronavirus recession will lead to a massive reduction in hours worked and wages
Tip of the ice-berg visible here
— Gregory Daco (@GregDaco) April 21, 2020
Kaushik Basu, Professor of Economics at Cornell University, tweeted about the difference between normal recession and a pandemic induced recession.
Basu noted that to recover from a normal recession injecting liquidity and boosting overall demand is essential. However, to recover from a pandemic induced recession, where the demand is boosted is crucial.
The difference between a general recession & a pandemic-induced one is that for the former the cure is to inject liquidity & boost overall demand. With the latter, WHERE you boost demand is crucial. It’s rather like some actual injections. Where you give them can be critical.
— Kaushik Basu (@kaushikcbasu) April 20, 2020