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Why The Coming Recession May Be Severe, but Short
April 20, 2020
Recessions are measured according to the 3 D’s, meaning depth, diffusion, and duration, says the Economic Cycle Research Institute (ECRI) founder Lakshman Achuthan. According to ECRI, the coming recession is likely to be extreme, one of the deepest in recent memory. It will also be very diffuse, impacting a wide spread of industries. Luckily, its duration is likely to be short,
ECRI argues that normal recessions are a vicious cycle in which falling output leads to job losses and declining income, which leads to fewer sales, which further reduces output and leads to more job and income loss, and so on until the cycle exhausts itself. Only then can economic growth begin to recover from recession lows.
For ECRI, the current recession will not have this same cycle, and will essentially end when the economic lockdown ends. We have already brought ourselves to the rock bottom of the cycle and can begin moving in a positive direction almost immediately. ECRI admits that this does not mean that reopening the economy immediately is the answer, as doing so could have economic implications, and also points out that the end of the recession will not necessarily feel like a recovery, will millions out of work and many businesses unable to reopen, but even if the recovery will be halting and gradual, it should not be as prolonged as the recovery from the Great Recession,
