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Economist Alan Blinder: US Probably Already in Recession on 'Fear of Shopping'


By    |   Wednesday, 11 March 2020 01:26 PM

Economist Alan Blinder says he thinks the economy probably already is in recession.

“I wouldn’t be one bit surprised if when we look back at the data, it is decided ... that the recession started in March,” Blinder, a former Federal Reserve vice chairman and now a professor at Princeton, told CNBC.

“We won’t know that. It takes months to get the data that would be relevant to a call like that. But it wouldn’t be a bit surprising to me,” he said.

While a recession is often defined as two consecutive quarters of negative economic growth, there are other measures, such as dramatic changes in the unemployment rate, that also are considered. Ultimately, the National Bureau of Economic Research is the arbiter. The Great Recession was deemed to have started in December 2007, but the NBER didn’t declare it until a year later, CNBC reported.

Blinder said the cause of the current downturn is “fear of shopping” and being in public places where the COVID-19 strain can be spread.

“You can understand why people don’t want to go to restaurants, shopping malls, not to mention travel,” he said. “Spending on all of those categories has probably plummeted and much faster than our system catches it.”

Blinder isn't alone in his pessimism.

Scott Minerd, Guggenheim Partners co-founder and Guggenheim Global chief investment officer, said that a global recession may be inevitable with markets finally “waking up” to the risk of financial and geopolitical contagion from the coronavirus, Bloomberg reported.

“Who could predict the exact chain of events set off by the coronavirus that leads us to the circumstances that we face today?” he recently wrote. “It is virtually impossible to identify the next domino to fall but one thing seems certain: They will continue to fall.”

"The market is waking up to not just viral contagion from #coronavirus, but also to financial and geopolitical contagion, and to the knock-on effect to corporate earnings and cash flows once the world enters a #recession which now appears to be inevitable," Minerd wrote.

The U.S. and Europe face the “distinct possibility” of a technical recession in the first half as the coronavirus outbreak dampens demand and supply and drives investors to safe havens, according to Pimco’s Joachim Fels.

“The worst for the economy is still to come over the next several months,” Fels, global chief economic adviser at Pacific Investment Management Co., wrote in a note to clients, which also cited concerns including a slump in China’s manufacturing and a weaker market for travel-related services, Bloomberg reported.

Material from Bloomberg and Reuters has been used in this report.

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Economist Alan Blinder says he thinks the economy probably already is in recession.
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Wednesday, 11 March 2020 01:26 PM
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