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March 25, 2020 Q&A

SCSU prof weighs in on coronavirus and the economy 

PHOTO | Courtesy SCSU Jim Thorson

James A. Thorson chairs the Department of Economics at Southern Connecticut State University in New Haven.

How likely is a recession as a result of the coronavirus pandemic and the closing of so many businesses?

If the social-distancing measures remain in place for a month or more, then a recession is almost inevitable. Even in our increasingly online economy, many of our transactions involve face-to-face transactions. In many sectors of the economy, spending is being curtailed — which results in lower incomes. The good news is that if the virus gets under control fairly quickly, any downturn should be relatively short.

Will federal economic stimulus help stave off a worse recession and help it bounce back more robustly when the virus is finally under control?

In all likelihood, economic stimulus should lessen the severity of a recession — as long as the stimulus induces additional spending in the economy. This additional spending is likely because many people have had their incomes reduced dramatically, so they will need the stimulus money to survive. Once the virus is under control, the economy should bounce back pretty quickly because there will be much pent-up demand.

What are your thoughts on the volatility of the stock market?

The stock market hates uncertainty and this virus has caused uncertainty. What we thought was going to be a two-week or so social distancing period has extended to an uncertain period of time. This is having devastating effects on businesses such as restaurants, hotels, airlines, among others. When this will end is anybody’s guess. Such uncertainty always makes investors nervous. The good news is that the virus will eventually come under control, and the economy and the stock market will eventually recover.

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