The grand economic question of our time is not the coronavirus, nor the lockdown, but how quickly do we put this all behind us? We know we're in a recession, and we know what has caused it, obviously enough. What we don't know is whether this time around will be like the recession of 1920, wherein by 1921, we couldn't quite see that it actually even happened, or whether it will be more like the events starting in 1929, when it took at least a decade to claw our way back.
The answer will tell us a lot about the election in November, but it's much larger than that. We're talking about the lives of nearly 330 million people.
There are two different things to consider when developing a forecast. For one, modern economies are horrendously complex things, taking centuries to develop. Interrupt them, and we get knocked back years, or potentially decades, and have to rebuild all over again. The other is that the economy stops dead pretty much every Friday night, and we've no great problem starting 'er up again Monday morning. Ultimately, the longer the recession lasts, the more likely we are to have permanent damage, putting us closer in line with 1929 than 1920.
So, the question becomes, how long will it last? As Niels Bohr pointed out, predictions are difficult, especially about the future. As with everything economic, we only have fragmentary information, but things are looking good. ADP is a payroll processing firm that makes monthly economic assessments based on its own clients. ADP assessed June's gain would be 2.3 million new jobs. The official Bureau of Labor Statistics number a few days later was 4.8 million new jobs. That's known in the trade as a blowout number.
Another close to real-time number is the Purchasing Managers' Index. Everything has to be made from something. If we ask producers, who buy products to make products, how things are going, then we get a good idea of what will be produced in the immediate future. In an index where anything above 50 is a gain, the 52.6% for U.S. manufacturing in June's numbers shows expansion. This is up from April's and May's very low levels, though we're not back to where we started at all. For services, the index stands at 57.1% for June. This is another blowout number, even though we're still not back to where we started. On a more positive note, services are 80% of the U.S. economy, so that higher number is vastly more important than the manufacturing one, which composes only 10% of the economy. That services number is also the fastest expansion since the number was first created in 1997.
Sure, we expect to see things getting better, considering the lockdowns are largely ending. But even so, we are seeing extremely cheering economic numbers. Things are getting better faster than just about any economic commentator has dared to predict. The probability of it being that V-shaped, swift recovery is rising strongly.
My own view is that the structure of the U.S. economy accounts for these results. Largely capitalist, largely free market, it's more adaptable than most others. We are seeing, as far as I can tell, a swift recovery from that lockdown-induced recession. It's great news because it means we're all slowly getting richer again as we creep out of the ditch.
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