Just five weeks ago, before the coronavirus pandemic brought the U.S. to a standstill, by many indicators the U.S. economy was thriving. "Everyone thought we were on top of the world. The stock market was at a record high. Unemployment was at record lows. Housing was doing well. Wage growth was improving. People thought we were invincible and that nothing could derail us," says Mark Zandi, chief economist at Moody's Analytics.
Although several U.S. states are partially reopening from the coronavirus shutdown this week, Americans shouldn't expect the economy to operate the way it did before the pandemic, says Zandi. "The economy will be fundamentally impacted. I suspect there will be fundamental changes in spending, saving, working, and living. We've seen the same from other seminal events like the Great Depression or even the financial crisis."
Here are some of the ways Zandi says Americans will feel the pandemic's impact on the U.S. economy over the next few months and years.
Regardless of the progress made to contain or cure the coronavirus, Zandi expects remote working will become increasingly more common, since many businesses continue to thrive virtually. "There will likely be more working from home since people have been communicating effectively through sites like Zoom."
Zandi's prediction is already playing out as some employers are embracing the new normal and offering remote or flexible work opportunities in increasing numbers, according to recent data from the job posting site FlexJobs, even for jobs like auditors and customer service agents.
Video by Stephen Parkhurst
Some professions, however, like in engineering, health care, and food services, need and will still need employees to come in. If your job requires you to be on site, Zandi predicts that enhanced health safety measures will become the norm once businesses reopen. "There might be a lot of temperature taking, temperature guns, and social distancing within the office. Like, there could be a rule that there needs to be a chair between every individual."
Don't count on all jobs coming back right away, either. As businesses reopen, Zandi doesn't expect employers to hire back all of the workers who were laid off or furloughed, since may sectors have seen profits take a hit as a result of widespread closures. "It's hard to know when business opportunities are going to reappear. Usually it starts back up in phases and it's not clear what businesses are going to be open when. It's not going to be easy or an automatic restart."
If you've lost your job as a result of the pandemic, Zandi recommends staying in the know and frequently and proactively looking for employment opportunities online: "It's important to be persistent and engaged."
Like other times of economic hardship, the fallout caused by the coronavirus pandemic will make Americans more cautious with their money, Zandi predicts. "This highlights the fragility of things. ... It will force us to see what we were doing wrong and how we can change, and hopefully households will be better prepared in the future."
Zandi predicts that as more Americans, especially younger ones, look for ways to save money, they'll move out of major cities and into the suburbs. An increase in remote job opportunities will also support this migration, he says. "It's probably going to change millennial habits. ... They may value urban living a little less and move out of cites. Their attitudes toward work might change, since it's easier to work from home."
The pandemic was already changing millennial spending at the end of February, according to a survey of 500 adults by First Insight. Over half, or 54%, of millennials said that the coronavirus had significantly or somewhat affected their purchasing decisions, the survey found. More so than other generations, millennials were being cautious with their money, prioritizing spending on necessities like food and household goods.
Having that kind of an attitude could be a wise move. While many Americans may feel blindsided by sudden widespread job losses, a volatile stock market and a plunge in oil prices, Zandi says economic downturns often come when we least expect them: "That's the way we always feel before recessions. It's not atypical."
Since the Federal Reserve defines a recession as two consecutive quarters of decline in real GDP, or gross domestic product, which is the value of all goods and services produced by an economy in a year, technically, the economy isn't in a recession yet. Zandi predicts the economy will enter into a recession, though, but he adds this is a downturn unlike others in recent history because "there's a health dimension to this. Many of us are stuck at home and we can't work even if we wanted to."
The bottom line is, whether the economy is booming or contracting, be consistent and cautious as you save and invest, Zandi says. "It's important not to get caught up in all of the euphoria and take on too much risk. Think of this as a lesson. You need to be prepared and you need to save and you need to be ready because something will go wrong."
In equal measure, don't let headlines about job losses or business closures discourage you, he says. "Don't get caught up in the pessimism. ... When you're in dark times like we are now, many people think those dark times will continue forever. But they don't. We're creative and innovative. We figure out how to solve problems."
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