The W-shape recession

The W-shape recession

Many economists predict a W-shape recession, versus the original V-shape, once predicted. A W means there will be two drops in the economy. As coronavirus is ravaging through the Southern states, economists do not have a very positive outlook for the future. It is even predicted that unemployment numbers will still be in the double digits by the end of the year.

What the experts are saying:

Robert Johnson, professor of finance at Creighton University, fears that the COVID-19 crisis could turn into a W-shaped recession. “Americans may end social distancing prematurely and that a secondary outbreak of coronavirus could force another round of social distancing, stalling the recovery,” said Johnson. If this happens, Johnson believes the recovery could be much longer than most people anticipate—a matter of years, not months, as the country battles new rounds of infection, reported an article written by David Rodeck with Forbes.

In a speech by the central bank’s vice chair for supervision, Randal K. Quarles stated “We don’t know about the pace of reopening, how consumers will behave or the prospects for a new round of containment,” Mr. Quarles said. “There’s probably never been more uncertainty about the economic outlook.”

What would a W-shape recovery look like?

“A W-shaped recovery refers to an economic cycle of recession and recovery that resembles the letter W in charting. A W-shaped recovery represents the shape of the chart of certain economic measures such as employment, gross domestic product (GDP), industrial output, and others,” states Jim Chappelow in an article on Investopedia. A W-shape recovery means that our economy would drop economic activity again, including unemployment, industrial output, and GDP. With the second wave of coronavirus highly anticipated we could see a W-shape if we are required to go back into a lockdown state.

Could a vaccine for coronavirus prevent a W-shape?

It is quite possible that if we get a vaccine in time for COVID-19 then we could see a V-shape recovery, however, there is not a vaccine expected for at least 6 months.

If you have questions about COVID-19 or symptoms of COVID-19 visit the CDC’s website for more information on how to protect yourself or how and where to get tested. If you are experiencing symptoms be sure to follow the CDC Guidelines and self-isolate.

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