Recovery depends on a lot going right, but the economy isn’t broken

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DETROIT — The forecasts seem impossibly wretched.

Economists at JPMorgan Chase project a 40 percent decline in gross domestic product in the second quarter. Trillions of dollars in economic activity abandoned in the wake of COVID-19. April’s unemployment rate is expected to hit 20 percent or more. That’s 25 million people without work. More than 817,000 filed for unemployment in Michigan in the last three weeks — and that’s only those who could access the online system here in the epicenter of the U.S. auto industry.

The numbers are all far, far worse than we saw in the Great Recession. But there is reason to think the bounce back might also dwarf the long, slow recovery from the 2008 crisis.

The National Automobile Dealers Association’s first-quarter sales analysis reported a 38 percent fall in new-vehicle sales last month compared with March 2019.

Second-quarter new-vehicle retail sales are expected to fall 80 percent in April and 40 to 70 percent in May, according to J.D. Power.

Showrooms in many states remain shuttered, depending on whether they are deemed “essential” by their respective governors.

While the fastest economic decline in recorded U.S. history is certainly depression-inducing, it’s still only a temporary recession — for now.

The economy is largely shut down because — and this is an important distinction — political, business and health leaders forced it to. This is intentional and not a fundamental crack in the global, national or local economies. Economic activity cratering is exactly what we want to curtail the disease. We, collectively, hit the pause button.

That has ramifications, such as job loss and near total loss of demand for everything but streaming services and groceries — U.S. consumer discretionary retail spending is down 80 to 90 percent right now, according to credit rating agency Fitch Ratings Inc. But jobs aren’t being wholly destroyed.

On Thursday, Michigan Gov. Gretchen Whitmer changed her executive order to include employees engaged in online vehicle sales and deliveries as “critical infrastructure workers.”

“To enable these critical workers to get to their workplaces, automobile dealerships will now be allowed to open for remote sales, though showrooms must remain closed,” the order said.

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Saurabh Shukla

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