US may be at risk of facing a second wave of coronavirus cases, according to an analyst. Reopening US too soon may impact economy.
Mark Zandi of Moody’s Analytics expressed concern about states that are taking a serious risk by reopening businesses too early.
He believes that a surge of new coronavirus cases would further damage the economy, especially at a time when there is no vaccine.
“If we get a second wave, it will be a depression,” Zandi told CNBC’s “Trading Nation” on Friday. “We may not shut down again, but certainly it will scare people and spook people and weigh on the economy.”
Zandi, the firm’s chief economist, said that a depression refers to 12 months or more of double digit unemployment.
The US Labor Department reported a 14.7% jobless rate for April on Friday. Meanwhile, non-farm payrolls increased by 20.5 million. Both sets of employment data reached post-World War II levels.
The Dow, S&P 500 and tech-heavy Nasdaq closed around 2% higher on Friday.
“The market is casting a pretty high probability of a V-shaped shaped recovery,” said Zandi. “The horizon may be a little short term: Next month, the month after, the month after that.”
According to Zandi, employment may begin to rebound by Memorial Day weekend as businesses reopen. He predicts that the gains will flow through the summer into early fall if a second wave of coronavirus infections does not take place.
“After that, I think we’re going to be in quicksand because of the uncertainty around the virus and the impact that it’s going to have on consumers and businesses,” he added.
Zandi has warned Wall Street about the risks brought by coronavirus since winter. He told “Trading Nation” that the Street was undervaluing what a pandemic could do to the economy. His forecast came before states implemented strict lockdowns to curb the spread of the virus.
He stresses the importance of solid progress on a vaccine for the economy to recover. A delay or failure to develop a vaccine within the next year or so would also lead to a 1930s-type downturn, according to Zandi.
“It’s critical. It’s a necessary condition for the economy to fully recover,” Zandi said. “We’re going to see the market reevaluate things at some point.”
US reopening plan
President Donald Trump once said that US reopening must happen even if it leads to more deaths and sickness from the coronavirus outbreak.
He suggested that Americans must begin returning to normal even if more people will die or get sick.
Trump said he is gearing up for the “phase two” of the US response to the coronavirus. A part of this next move is to break up the White House task force of public health experts, including Dr. Anthony Fauci and Deborah Birx.
The president acknowledged that US reopening would likely lead to more deaths and sickness.
“Will some people be affected? Yes. Will some people be affected badly? Yes,” Trump said. “But we have to get our country open and we have to get it open soon.”
