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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:

  1. 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).
  2. 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.
  3. 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.

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