op_lhatheway2_Brian van der Brug  Los Angeles Times via Getty Images_unemploymentjobscoronavirusUS Brian van der Brug/Los Angeles Times via Getty Images

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Whither the Pandemic Economy?

The good news is that the unprecedented initial policy response to the economic downturn triggered by COVID-19 has averted a worst-case scenario, making comparisons to the Great Depression unwarranted. The bad news is that a return to strong, sustained growth seems as far off as ever.

JACKSON HOLE – To comprehend the present, much less to foresee what lies ahead, is as challenging today as at any time in my 30-plus years of professional life as an economist, forecaster, and investor. But challenging does not mean hopeless. The contours of the global economic landscape remain discernible despite the intersecting layers of fog brought on by a pandemic, rising populism, and widespread social strife.

The COVID-19 pandemic’s negative impact on global economic activity is unprecedented. During the second quarter of this year, the US economy is estimated to have contracted at an annualized rate of 32.9% – a far steeper decline than any other in the post-war period. Economic lockdowns and a sharp increase in precautionary savings amid so much uncertainty have depressed spending, impeded production, and disrupted distribution across wide swaths of the world economy. The UK has endured its worst quarterly GDP contraction (20.4%) in recorded history.

As a result of such turmoil, from February to early June, global aggregate demand collapsed, output plunged, and unemployment soared. Unemployment rates across the world’s advanced economies have approached levels not seen since the Great Depression of the 1930s.

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