Economists warn of costly COVID-19 resurgence if US reopens hastily

Analysts have said the unemployment figure in the US does not capture the full scale of the COVID-19-induced job crisis

As more US states have started to partially reopen amid the COVID-19 pandemic, many economists have warned that moving too fast might risk a second wave of infections, which could have grave financial impacts.

"If we get a second wave, it will be a depression," Xinhua news agency quoted Mark Zandi, chief economist of Moody's Analytics, as saying in a CNBC interview, defining the depression as 12 months or more of double-digit unemployment. "We may not shut down again, but certainly it will scare people and spook people and weigh on the economy," Zandi said.

Warning about reopening

Representational Picture

Philadelphia Federal Reserve Bank President Patrick Harker warned that reopening the economy too quickly would not only bring a "health catastrophe" but also "reverse the economic recovery". "In this less hopeful scenario, I project a similar growth path to the baseline for 2020, followed by a painful economic contraction of GDP (gross domestic product) in 2021 as shutdowns are reintroduced," he said at an event hosted by the Chicago Council on Global Affairs.

Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Indiana, recently told Xinhua on Monday that the second wave of infections would be "very damaging to the economy".

Data released on May 8 by the Bureau of Labor Statistics (BLS) showed that US employers cut a staggering 20.5 million jobs in April, erasing a decade of job gains since the global financial crisis and pushing the unemployment rate to a record 14.7 percent.

Highest level of unemployment since the Great Depression

While this marks the highest level of unemployment since the Great Depression in the 1930s, analysts said the figure does not capture the full scale of the COVID-19-induced job crisis, and the worst was yet to come. Zandi said that jobs would start to come back by Memorial Day weekend in late May, as businesses gradually reopen. If there would be no second wave, he said the job growth would continue in the summer and early fall.

"After that, I think we're going to be in quicksand because of the uncertainty around the virus and the impact that it's going to have on consumers and businesses," Zandi said. The US currently accounts for the world's highest number of COVID-19 cases and deaths at 1,347,388 and 80,397, respectively, according to the Johns Hopkins University.

Related topics : Coronavirus