Mary Daly: I don’t see a V-shaped recovery. What I see is, as people are allowed to come out of their homes, some reengagement in economic activity.
People are going out because they’ve been sheltering for almost three months. They’re going out and putting a toe in the water. But they’re watching the news as well, and they may see COVID-19 cases spike, or continue to increase in some areas. We just don’t know yet how much persistent confidence we’re going to see in these communities. That will largely be determined by the virus and how much we have been able to mitigate its spread.
Derek Thompson: What does the shocking unemployment report really mean?
I wouldn’t be immediately jumping to evidence of a V-shaped recovery. Just to add to that, I’m not hearing from any of my contacts that a V-shaped recovery is what is before us. Some were holding out hope. But that hope has gone. And now people are looking for a recovery that is slow, but steady.
Lowrey: What do you see as the biggest risks weighing on economic activity as the economy reopens?
Daly: It’s the virus. We don’t know enough about the virus to accurately forecast with any confidence what’s going to happen.
My biggest concerns, right at the top: These pauses we’ve put in place—you’ve heard about forbearances on loans—ultimately, if we ask businesses to stay out of production for too long, these turn into insolvencies. Persistent pain. We’re all interconnected, so as these insolvencies emerge, then job losses that were thought to be temporary become permanent. Individuals are now dislocated and have to get back into the labor market.
The virus will determine a lot of it. But those are the two outcomes that I worry the most about: persistent job losses and persistent business failures.
Lowrey: Given that uncertainty, it seems like stimulus, whether it is monetary or fiscal, is not going to work in the way it might normally work. Stimulus doesn’t work against a virus. How do you make policy to fight a virus?
Daly: A shock came to our shores. Coronavirus is, first and foremost, a public-health crisis. And that’s how we responded to it. What do we need to do to ensure that we can continue to be healthy? We shelter in place. And we cannot stimulate the economy when we, for public-health reasons, have been asked to stay at home and not engage in economic activity.
That puts the government in a position of providing emergency relief: We’re trying to build a bridge over the coronavirus, so that people can make it through the coronavirus and be best positioned to reengage in economic activity when the virus is safely behind us. That is different from the things the government normally does.
I always have these things simultaneously in my mind: Do we need a longer bridge? If we build a longer bridge, what would it look like? And once we’re through with the coronavirus, how do we have faster growth, but also more inclusive growth? At the end of the expansion, we were really pushing on inclusive growth.