Rarely in my lifetime, has there been such a sense of uneasiness and uncertainty. Of course there have been crises during my 62 years including wars, terrorist attacks, natural disasters, economic recessions and stock market crashes. But I don’t think I’m alone in feeling like the current climate is different. As a nation, we feel more divided and as a business community, there is a lot of uncertainty.
Contributing to this uneasiness are several factors, of which the two most significant are the surge in COVID-19 cases as we race toward implementing a vaccine successfully, and of course the unprecedented clunky and strange transition in our U.S. presidential leadership. Of course the intensely emotional politics that associate with both of these related forces are challenging to follow and be sensitive to.
Ultimately, what we as people and families care about the most is our quality of life today and for future generations.
So, as I ask myself, where is the economy headed, I really ask it in the context of wondering where our country is headed. Are we looking at more, or less uncertainty and malaise or will we get to a better state of peace and uncertainty and calm? And answering these questions should weigh on the minds of every leader, employee, and consumer.
How these issues get resolved will impact how we invest our money and plan for the future. Employees worry about the stability of their employment and their ability to keep families safe and financially secure. As leaders, we worry about our ability to invest properly in the financial success of our businesses so that we can help employees meet those objectives. And of course, those consumers and small businesses whom we serve, are wondering what lies ahead for them as well.
James Carville, a well-known strategist for Bill Clinton in his successful bid for president in 1992, coined the phrase, “it’s the economy, stupid.” This was intended as the key focal message in the campaign to unseat, then-president George H.W. Bush. A second message was, “change vs. more of the same.” Bill Clinton prevailed because an economic crisis had turned the public’s approval ratings of President Bush downward.
Today, as we await the closure and transition on the presidential election and its implications for addressing the spike in coronavirus cases and deaths nationwide, the health of our economy and the emotional and financial health of people hangs in the balance.
So, where are the country and the economy headed?
Just last week, the Conference Board, a consortium of economic experts and thought leaders, issued its latest forecast on the U.S. economy. Rather than throw a lot of statistics out, the summary was basically, “well, it depends.” The “most probable” estimate made some important base assumptions on the most important variables that included, “1) the scale of the COVID-19 resurgence and any resulting lockdowns; 2) the status of labor markets and household consumption and spending; 3) the size and timing of additional fiscal stimulus; 4) the timing and availability of a vaccine; 5) the degree to which volatility in the US political transition affects consumer and business confidence.
Wow! That’s it? Those challenging and converging issues will determine where the economy ends up. It’s therefore understandable why the news media have so obsessed on each of these issues. Depending on your assumptions about them, you either get a dire forecast or a more positive one.
I found it reassuring that the so-called, “most probable” consensus estimate of the Conference Board was that the economy will grow 2.2 percent (annualized) in this 4th quarter of 2020, for an annual contraction of 3.6 percent in GDP, followed by an annual expansion of 3.4 percent next year. That sounds pretty good. And the stock market seems to be mirroring that sentiment as the S&P500 index is up 17% so far this year, and up 6 percent in just the last three months leading up to, and following the election.
The Conference Board’s summary of their assumptions on the great unknown variables included, that there would be a moderate rise in COVID-19 over the winter with intermittent localized lockdowns; limited improvement in labor markets and consumption into early 2021; the implementation of limited fiscal stimulus in the first half of next year; an imminent approval of a vaccine, but no broad dissemination until mid-year; and a non-disruptive political transition.
That “most probable” forecast should make us all feel a bit better and more certain about our future. But with that said, the Board’s downside forecast was not so encouraging. The pessimistic scenario forecasts a “double-dip” recession with an economic contraction of 3.8 percent in 2020 and zero growth in 2021. This included assumptions of a larger spike in COVID with widespread lockdowns over the winter; a deterioration in labor markets and spending; no additional fiscal stimulus in 2021; no vaccine in 2021; and a very bumpy political transition that disrupts business and consumer confidence. Under this scenario, the economy would not recover to pre-pandemic levels until sometime in 2022.
That means we could be in for a longer-than-normal recession with the accompanying high levels of unemployment and negative impact on quality of life.
The Board also rightfully pointed out that other downside factors include rising evictions and foreclosures creating financial stress on banks and credit unions, high stress on state and local government budgets, and an exacerbation of already high levels of inequality.
With this as a backdrop it wasn’t surprising that US Chamber of Commerce CEO Tom Donohue called for an immediate transition to the Biden presidency by saying “President-elect Biden and the team around him have a wealth of executive branch experience that should allow them to hit the ground running.” Further, he said, “While we respect the Trump campaign’s right to seek recounts, to call for investigation of alleged voting irregularities where evidence exists and to exhaust legitimate legal remedies, there is no indication that any of these would change the outcome…In the days ahead it is critical that we move forward together to strengthen our country.”
We are also hearing bi-partisan calls for Congress to pass more much-needed stimulus legislation. JPMorgan Chase CEO Jamie Dimon called on Congress to pass another stimulus package to help the economy and struggling Americans get through the “toughest part of COVID.” And he didn’t mince words. He said, “We have this big debate: ‘Is it $2.2 trillion, $1.5 trillion?” You’ve got to be kidding me. Just split the baby and move on. I mean this is childish behavior on the part of our politicians. We need to help the citizens of America.”
I hope that, by the time this article is published, we will have seen stimulus legislation pass in a lame duck session of Congress, as well as progress toward an orderly succession in the presidency. More than hope, these two things have to happen in order to deal with the COVID crisis and to strengthen consumer and small business confidence, which then fuels economic progress. At a time of Thanksgiving, we have much to hope for with the imminent delivery of a COVID vaccine and forces that bring more leadership and civility to challenges we face.
The important issues of our time all seem to intersect with the COVID surge impacting the economy, presidential politics influencing public opinion regarding masks and COVID, the outcome of the presidential election transition affecting racial justice tension, and all of these combined influencing the confidence of consumers and business leaders in the future. This confidence and feeling of stability ultimately drive spending habits, economic production and employment.
For all of us as leaders and personal leaders, we seem to be at an important inflection point, not unlike the Chamber of Commerce CEO Donohue who felt it timely to speak in support of a move toward a smooth leadership transition. His fiduciary duty is to represent the business community and to make statements and decisions that help the economy overall, without political bias.
Nobody, not even the Conference Board, can accurately predict the future. But great minds are suggesting that if we can individually and collectively manage the variables that will most impact the future, we can have greater confidence in an economic recovery and improved quality of life, something we should all want.
Our individual decisions as personal leaders and our ability to speak out, and to speak up in order to rally society toward progress represents our greatest duty.
Despite the uncertainty, I choose to be optimistic about our future and to believe that we will find the best in ourselves to make the changes needed to find our way to better economic times and a better quality of life for us and for generations to come.
So, where is our economy and our country headed? I agree that it depends. It depends on each of us. Democracy works. Leadership matters. And personal accountability and responsibility will always matter more than anything else.