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Shape of U.S. recovery far different than what experts projected at start of pandemic

Posted at 12:11 PM, Dec 09, 2020
and last updated 2020-12-09 15:11:09-05

Just weeks away from the New Year, economists and other experts are reflecting on the trajectory of our economic recovery. At the start of the pandemic, nine months ago, most experts were optimistic and agreed that the U.S. had a strong shot at seeing a fast V-shaped recovery.

“We can turn this around this year. I still think there’s real hope for that,” Todd McCracken, with the Small Business Association, said in March.

Even with some required government shutdowns, most experts believed the U.S. would most likely see a U-shaped recovery. That means things would pick up a little slower, but it would still be considered a relatively fast rebound.

“There was also the L, which meant we were going to go down to the bottom and no one knew where we were going to go, and then there was the W, which meant we were going to go down and then we were going to come up, and actually, that is pretty much what is happening,” said Jonathan Drapkin, president and CEO of the Hudson Valley Pattern for Progress.

Drapkin pointed out the other and more dreaded “W” or “L” scenarios experts feared back in March appear to be more in line with what the U.S. is actually experiencing now.

“It’s definitely more of an L, said Elise Gould, an economist with the Economic Policy Institute.

“Personally, I think any hope for a quick recovery has gone by the wayside. Over the last few months, we have actually seen the recovery slow. So, last month, we saw that we had a gain of 245,000 jobs, much lower than a month before that, lower than a month before that. And so, at this rate, we could be years away from a full recovery.”

According to Bankrate senior economist Mark Hamrick, we could also be seeing both a swift recovery and a worsening one, simultaneously.

“My sense for many months now has been that this has been a so-called K-shape recovery,” said Hamrick. “Why do we call it a K? Essentially, we have one leg moving up and the other moving down [and] that is indicative of this have and have-not economy.”

Hamrick supported that idea and recovery trajectory by pointing out that unemployment levels for higher-income workers are back to pre-recession levels, while lower-income workers are still struggling with elevated levels of unemployment

“My concern is that people who have been hurt by this economic downturn are not going to heal from this quickly,” explained Hamrick.

However, while experts seem conflicted over what economic recovery pattern we are actually seeing now, all of them agree on one thing: the most successful way out of the alphabet soup of economic recovery paths and to normalcy is with a discovered vaccine and wide distribution of it.

“The other thing that can truly help in the short-term is a stimulus package out of Washington,” added Drapkin.