The Economy Faces a Bumpy Ride During its Healing Phase
In an interview, Michelle Meyer said the economy was facing a bumpy ride as it tried to recover from the coronavirus recession shock.
Michelle Meyer is the head of U.S. economics at the Bank of America.
She said the economy had entered the third stage of the coronavirus pandemic. Experts refer to this as the healing phase. It can be understood as the time period following the lockdown. Specifically, the transition period from when businesses began to shut down and to then later started to reopen.
Michelle said the healing phase is part of the cycle where it was going to be a little bit harder and a bumpy ride ahead.
She said this before the Commerce Department reported that the U.S. economy experienced a historic quarterly plunge. There was a 32.9% swoon in GDP from April to June.
In February, the U.S. officially entered the recession as unemployment surged and production halted due to lockdowns to stop the virus from spreading.
In May and June, businesses started to reopen. As a result, key metrics such as retail sales and job growth have bounced back.
How Do Economists Feel?
According to Meyer, the June jobs report showed a record increase of 4.8 million nonfarm payrolls. However, it will be the “high water mark” in terms of monthly payroll growth.
Some economists expect job growth to slow as the coronavirus cases continue to rise, and business uncertainty remains high.
Meyer said the U.S. economic growth would depend on various factors. Such as whether the U.S. contains the virus and the degree of fiscal and monetary stimulus.
The Fed and Congress have already injected trillions of dollars into the economy to try and blunt the effects of the pandemic. Washington is also likely to put in more stimulus.
According to Michelle, it’s fair to make the case that monetary and fiscal policy has helped drive higher the stock market in the same way they are supporting the real economy.
Michelle said disinflation was a bigger concern than inflation because of the weak demand from businesses and consumers.
She added that getting inflation on the upside would be a good problem because it would show a drop in the unemployment rate, wages picking up, and people having more purchasing power.