The Normal Economy is Never Coming Back

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As the coronavirus lockdown began, the first impulse was to search for historical analogies—1914, 1929, 1941? As the weeks have ground on, what has come ever more to the fore is the historical novelty of the shock that we are living through. The economy is currently in something akin to free fall. If it were to continue to contract at its current pace, 12 months from now GDP would be one-third lower than at the beginning of 2020. That is a rate of shrinkage four times faster than during the Great Depression of the 1930s. There has never been a crash landing like this before. There is something new under the sun. And it is horrifying.

As recently as five weeks ago, at the beginning of March, U.S. unemployment was at record lows. By the end of March, it had surged to somewhere around 13 percent. That is the highest number recorded since World War II. We don’t know the precise figure because our system of unemployment registration was not built to track an increase at this speed. On successive Thursdays, the number of those making initial filings for unemployment insurance has surged first to 3.3 million, then 6.6 million, and now by another 6.6 million. At the current rate, as the economist Justin Wolfers pointed out in the New York Times, U.S. unemployment is rising at nearly 0.5 percent per day. It is no longer unimaginable that the overall unemployment rate could reach 30 percent by the summer.

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