Arizona’s Economic Outlook in the Age of COVID-19
D
espite how hard Arizona has been hit by COVID-19, the state will experience a V-shaped economic recovery—and is already coming out of the COVID-19 recession—predicted economist Chris Thornberg in a recent virtual economic forum held by Alliance Bank of Arizona.
Thornberg, Founding Partner of Beacon Economics, was bullish on the U.S. economic recovery, forecasting the COVID-19 recession will be much shorter than previous recessions because:
- It came on the heels of a healthy economy and there were no major bubbles or high consumer debt preceding this recession (unlike the Great Recession which followed a housing bubble that created unsustainable imbalances in the economy).
- Job losses are temporary, not permanent. The tight labor market that preceded COVID-19 will help those who permanently lost their jobs get back to work relatively quickly.
- Government stimulus will lead to strong recovery once the virus is removed from the economy.
With the second quarter decline in consumer spending accounting for about 80% of overall economic decline, increases in consumer spending over the last three months (see graphic above) are bringing us out of recession, says Thornberg. Additionally, the personal savings rate was 26% (annualized) in the second quarter – the highest ever. With these positive markers, Thornberg predicts further increases in spending, particularly in health care, as COVID-19 is further contained.
Thornberg also said there will likely not be a second wave of COVID-19 cases in former hot spots because they may be closer to herd immunity than we imagined. This is because data suggests for every person who tested positive, there are 8-10 people who have had the virus but never been exposed, as well as evidence of potentially as much as 30% of the population having innate resistance to the disease.
We will continue to monitor economic trends and provide you with the most up-to-date information so you can be confident in your business decisions in this time of great uncertainty.
Arizona’s Economic Outlook in the Age of COVID-19
Despite how hard Arizona has been hit by COVID-19, the state will experience a V-shaped economic recovery—and is already coming out of the COVID-19 recession—predicted economist Chris Thornberg in a recent virtual economic forum held by Alliance Bank of Arizona.
Thornberg, Founding Partner of Beacon Economics, was bullish on the U.S. economic recovery, forecasting the COVID-19 recession will be much shorter than previous recessions because:
- It came on the heels of a healthy economy and there were no major bubbles or high consumer debt preceding this recession (unlike the Great Recession which followed a housing bubble that created unsustainable imbalances in the economy).
- Job losses are temporary, not permanent. The tight labor market that preceded COVID-19 will help those who permanently lost their jobs get back to work relatively quickly.
- Government stimulus will lead to strong recovery once the virus is removed from the economy.
With the second quarter decline in consumer spending accounting for about 80% of overall economic decline, increases in consumer spending over the last three months (see graphic above) are bringing us out of recession, says Thornberg. Additionally, the personal savings rate was 26% (annualized) in the second quarter – the highest ever. With these positive markers, Thornberg predicts further increases in spending, particularly in health care, as COVID-19 is further contained.
Thornberg also said there will likely not be a second wave of COVID-19 cases in former hot spots because they may be closer to herd immunity than we imagined. This is because data suggests for every person who tested positive, there are 8-10 people who have had the virus but never been exposed, as well as evidence of potentially as much as 30% of the population having innate resistance to the disease.
We will continue to monitor economic trends and provide you with the most up-to-date information so you can be confident in your business decisions in this time of great uncertainty.