The COVID-19 pandemic is causing tremendous human and economic hardships both domestically and globally. The measures taken to protect public health have induced a sharp decline in economic activity and a surge in job losses, which directly impacts consumer spending. The lowest unemployment rate in a half a century soared to a postwar high of 14.7% in April. The disruptions to economic activity materially tightened financial conditions and impaired the flow of credit to households and businesses. The Federal Reserve, in response to tightening financial conditions, quickly lowered its policy interest rate to near zero in March and took extraordinary measures to bolster the flow of credit to households, businesses, and communities. As a result of this monetary policy response, financial conditions have improved considerably alongside the flow of capital within the economy.
While we trained our eyes to the PMIs, unemployment rates and wage growth in prior quarters in order to forecast the sustainability of growth and durability of consumption in a global expansion, the rapid deterioration of conditions due to a self-inflicted recession in response to a global pandemic has turned our attention to epidemiological data, virological research and development, and mobility data in an attempt to triangulate if and when there might be a path towards a more “normal” environment.