US economy between hope and fear – second lockdown but unlikely

The news from the USA is currently divided into two parts. On the sunny side are the latest reports on the economic situation. Whether on the housing market, the consumer and industrial climate or the employment figures – everywhere the indicators have been moving upwards again recently, in some cases even very steeply.

On a positive note, the ISM purchasing managers‘ index for the manufacturing sector even managed to cross the growth threshold in June. It now stands at 52.6 points. The loosening of the lockdown measures and the extensive state aid measures have evidently given the economy a new impetus.
Certainly, the values from before the crisis are not yet being reached again. Particularly noteworthy is the unemployment rate, which currently (June) stands at 11.1 percent. The annual average for 2019, i.e. „before Corona“, was much lower at 3.7 percent. Nevertheless, the data show that the economy can recover surprisingly quickly. Will the development of the economy as a whole even take on the shape of a V, meaning that the deep crash will be followed by a sharp rise?

One could hope so, if it weren’t for the second page of the reports. Among the gloomy news is the daily report of new infections with the corona virus. In the USA this number is visibly on the rise again. There were almost 50,000 yesterday – much more than at the previous high points in April and May. Scientists warn that the figure could even double. It is possible that the USA is already experiencing the dreaded 2nd virus wave. Or are the higher values just a result of more tests? That is unclear at this point.

What is clear, however, is that with the increasing number of corona cases, the burden on the economy is also increasing again. The president said there will be no national lockdown. However, in the economically strongest states of the USA, California and Texas, of all states, the plans to open up the economy have in some cases been halted or scaled back. Initially, this will essentially only involve restrictions for the restaurant industry and cultural institutions. The braking effects on the economy should remain limited for the time being. However, the number of new infections is an impressive reminder that the pandemic is far from being under control.

A second national lockdown would put an abrupt end to the current recovery of the US economy. But such a development does not seem very likely, neither in the USA nor in the other industrialized countries. In the meantime, there are some drugs that can be used in an emergency. In addition, the capacities in the health care systems have been adapted to the requirements of the pandemic. As a result, the overall sustainability of the health systems has increased. In addition, the number of healthy people has risen sharply, which should have made societies more resistant to the virus. The decision for a renewed national lockdown would also have a very high political and economic price for those responsible. The renewed recession would be deep and probably also relatively tenacious, as uncertainty would rise sharply and the scope for fiscal and monetary policy would be largely exhausted.

All in all, the sharply rising corona cases are of course a human tragedy, but they should not lead to a renewed national lockdown. Of course, there may be regional restrictions, but these should mainly affect individual freedom. Thus, the increasing corona cases to the USA could slow down the recovery, but not slow it down.

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