When thinking about how the American economy will recover, many experts turn to letters for answers. Usually the letters are “V”, “U”, or “L”.
“V” stands for a V-shaped recovery. It is a best-case scenario in which our economy comes out of this sharp downturn with businesses opening and everyone quickly going back to work, essentially an equally sharp bounce back.
In a U-shaped recovery, the economy rebounds just little bit slower.
Now, “L” is the dreaded scenario. It would mean we would linger in this downturn for quite a while, and just barely crawling out of it after a long period of time.
A few weeks ago, most economists and financial experts, agreed there was a significant chance the U.S. could have a quick rebound and V-shaped recovery.
“If everyone is really good about doing what needs to be done,” said Robert Stammers with the CFA Institute in March, “it could be coming back into things as usual.”
In March, Todd McCracken, the President of the National Small Business Association said, “We can turn this around this year, I still think there’s real hope for that.” However, just a few weeks later he said, “I don’t think that anymore.”
McCraken is amongst many who now believe it will take the U.S. slightly longer to get jobs back, restore markets, and recover.
“Even when this thing turns it is not going to turn uniformly across the country,” said McCracken, “So even if I as the business owner am ready to do business again in my area where we flatten the curve or reduce the curve, it doesn’t follow that my vendors, my customers, and my supply chain are in the same spot.”
McCraken believes we are most likely now to see a U-shaped recovery, and many experts agree. In fact, in a recent Reuters poll of 50 economists, half the respondents predict a U-shaped recovery. Only a few experts pointed to some less likely and unusual recovery shapes, like the W-shaped recovery, the square root shaped recovery, or even a tick-shaped recovery sometimes called the “Nike Swoosh.”
“I think that it might be a short “V” followed by a longer slant, some people are calling this a square root recovery,” said Economist Igor Popov. “I think we will see there is a lot of pent up demand for a lot of activities that people are unable to do while they are social distancing, but at the same time, a lot of sectors will have structural changes that will just take some time.”
Regardless of whether we see a traditional recovery trajectory or one of these new shapes some are predicting, the key is all experts still agreed the economy will bounce back.
