HARRISBURG, Pa. —
As the coronavirus crisis continues to spread, economists warn it will almost certainly have a severe impact on the U.S—and world—economy.
“Is a recession avoidable? Probably not,” said Tracy Burke, a partner and investment consultant at investment firm Conrad Segal.
The Dow plunged nearly 3,000 points Monday, its worst day since 1987. Investors fear large-scale quarantines, travel restrictions and closures will drive down consumer spending, which would affect large companies but hit small businesses the hardest.
“Even in three or six months down the road, there are going to be some of these smaller businesses that just won’t be able to sustain and that will close down, unfortunately,” Burke said.
Many small businesses don't have the funds to operate longer than a few weeks without additional income. Pres. Donald Trump said Sunday that the crisis could last through the summer.
Even after it comes under control, economists worry people will still avoid going out. That fear could lead to a vicious cycle in which customers don’t buy anything, so businesses lose money and lay off workers, so more people stay home and don’t buy anything.
“That will have an impact, a very serious impact, if their paycheck stops, especially some of these smaller businesses that just can’t continue to pay their employees,” Burke said.
In an emergency intervention, the Federal Reserve slashed interest rates to near zero.
The Treasury Department is proposing an $850 billion stimulus package for affected industries.
Political momentum is building in Congress for a proposal to send checks directly to American workers.
“Many companies have now shut down, whether it's bars or restaurants, Americans need cash now and the President wants to get cash now, and I mean now, in the next two weeks,” Treasury Secretary Steven Mnuchin said at a Monday press conference.
These measures, plus a previously booming economy, could lessen the impact of a recession.
“Once this goes away, once it goes through and we're done with it, I think you're going to see a tremendous, a tremendous surge,” Pres. Trump said at the press conference.
Economists are advising investors not to pull out of the stock market just yet.
“It’s staying the course, allow the markets to recover,” Burke said.
Only time will show the full scope of the downturn to come, he added.