Many American businesses have been put on hold as the country deals with the worst pandemic in over one hundred years. As the states are deciding on the best strategy to slowly and safely reopen, the big question is: how long will it take the economy to fully recover?
Let’s look at the possibilities. Here are the three types of recoveries that follow most economic slowdowns:
- V-shaped recovery: an economic period in which the economy experiences a sharp decline. However, it is also a brief period of decline. There is a clear bottom (called a trough by economists) which does not last long. Then there is a strong recovery.
- U-shaped recovery: when the decline is more gradual, i.e., less severe. The recovery that follows starts off moderately and then picks up speed. The recovery could last 12-24 months.
- L-shaped recovery: a steep economic decline followed by a long period with no growth. When an economy is in an L-shaped recovery, getting back to where it was before the decline will take years.
What type of recovery will we see this time?
No one can answer this question with one hundred percent certainty. However, many top financial services firms are anticipating for a V-shaped recovery.
Is there any research on recovery following a pandemic?
There have been two extensive studies done that look at how an economy has recovered from a pandemic in the past. Here are the conclusions they reached:
Does everyone agree it will be a ‘V’?
No. Some are concerned that, even when businesses are fully operational, the American public may be reluctant to jump right back in.
As Market Business News explains:
“In a typical V-shaped recovery, there is a huge shift in economic activity after the downturn and the trough. Growing consumer demand and spending drive the massive shift in economic activity.”
If consumer demand and spending do not come back as quickly as most expect it will, we may be heading for a U-shaped recovery.
No one knows for sure how quickly Americans will get back to “normal” life. We will have to wait and see as the situation unfolds.
Meanwhile, our local real estate market has seemed to have stabilized.
Although buying activity has slowed, sellers are holding firm on their list price and home inventory continues to be low.
Employment for major high tech employees has remained stable with no immediate signs of layoffs. Indications we are moving in a positive direction as state and county officials start to unveil plans to ease shelter in place rules may also be helping buyer confidence.
Recently some countries such as China, Germany, and South Korea have announced an uptick in cases after they have relaxed their shelter in place policies. This will surely happen to us as Santa Clara County and neighboring counties move to open up the economy and restrictions.
Recent cases in Santa Clara County have been decreasing but likely to increase as shelter in place policies are relaxed.