It’s that time of year again! Every four years we see questions surrounding US government leadership and administration, and face usually predictable economic cycles surrounding the election season. 2020 has been anything but predictable. Since I work with the Economist Group, I am very interested in the outlook they are providing the staff about this election cycle, but we have seen unusual circumstances in Q2 of 2020 regarding the economic outlook.
Without going into great detail, it is well known that the pandemic has created economic downturn in many economies globally. In the US, the speed of recovery looked optimistic. NPR reported in early July that job growth had increased, recovering from the pandemic. However, there are industries being ravaged. Commercial real estate, for example, will have a long slow recovery while their small business tenants have shuttered their doors, either seeing an opportunity for retirement, or unable to survive months of lockdown. The US itself, however, has stood in the way of this predicted recovery with increased outbreak again, while other countries in the world have successfully managed or contained the outbreak through public health measures, and are beginning to see economic recovery. Those countries, however, are not in the midst of their most important election cycle.
Usually, there is economic slow down surrounding Presidential elections while companies stall on decision making before having some certainly about what direction the upcoming administration will be heading. What legislative changes they might expect to come down the pipeline creates a pause in business strategy and organizational change. Those are the economic conditions we could expect under normal conditions. However, how will these economic patterns be disrupted by the economic roller coaster the US has been experiencing in the past few months? How will that roller coaster progress over the upcoming months? What expectations, if any, can we have, other than to expect the unexpected?
The Economist has been becoming increasingly certain in their projections of the election outcome. When I joined their webinar a month ago on the topic, they could only say they felt 60% certain in a Biden victory, just because of the timespan between that discussion and the election date. Whatever the percentage of certainty, they are now feeling secure enough in that prediction to go to calling it “very likely.” If this outcome is looking more and more likely, will we avoid the usual election bounce correlating to uncertainty of what policies we can expect coming down the pipeline? The current economic roller coaster, largely caused by the interruption of another outbreak in the optimistic recovery, may be the conditions which are creating greater certainty about the election outcome. In recent weeks, as my country of Germany has successfully regained normal economic activity, along with many globally, I have been astounded to watch the graphs of countries which have not contained the virus. The graphs and charts show three major economies which are not succeeding in outbreak containment: Brazil, Indian, and Russia.
For those who have known me for a while, you might notice those are three countries that spell the famous BRIC “emerging economies” opportunities which were being marketed and pushed in the past decade, of which my skepticism was widely known and met with backlash. It could be a great opportunity to study the correlation between healthcare infrastructure and economic stability, as this pandemic is creating a petri dish (excuse the opportunity to insert a little biology into a topic about economics) of observations and studies about global conditions and response to this kind of situation. What I found more astounding, however, was that the US outpaced all of these “emerging economies” fiercely in the rise in cases. Once a correlation factor is determined between healthcare infrastructure and economic stability, I would be interested to see how that correlation factor would be applied to the US, then.
The Biden administration, since that looks likely, will have a lot of hard work to do to put the country back on the economic path. Even once the pandemic is contained or a virus arrives. Certainly, a more stable leadership structure and clearer administrative goals will help mitigate the resiliency of the US economy to handle this external stress factor. My undergraduate research was applying stress factors to vectors (virus transmitting organisms) to test their resiliency and impact on virus transmission. The current stress factors being applied to the US economic ecosystem seem to indicate high transmission. Having a colleague who has long been a trusted advisor of Mr. Biden, I have some confidence that there will be a lot of work done in advance, now, to prepare for what they will do to address these challenges, no matter how overwhelming it might seem. They will only be able to eat the elephant one bite at a time, however, less distraction will probably lead to greater progress in that task. Does that mean we are looking at less of a bounce surrounding the elections? I find it hard to keep track of what constitutes a “bounce” in the current conditions where expected recovery trajectories are directly interrupted by lack of clear public health directives. As I watch this space, I will try to keep followers abreast of relevant topics, studies and stories that could give us a clearer picture.