The Economy Under COVID-19: Notes from the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

During the 2008-2009 economic doldrums, GM and Chrysler needed government bailouts. In this current COVID-19 crisis, Boeing dearly wants to avoid a similar fate. More than 40% of commercial aircraft around the world are said to be sitting idle on runways or in hangars. They must come out of storage and be re-deployed before the thoughts of airline owners will turn to purchasing new planes.

To slash expenditures, Chicago-based Boeing is offering buyout packages to its 160,000-member workforce. The company has a sizable storehouse of cash on hand and access to enormous sums of credit. It’s one of America’s largest exporting firms. Uncertainty as to its future seems unimaginable. It’s also true, however, that Boeing entered this maelstrom more vulnerable than usual due to the safety failings of its Max 737 passenger jets.

There’s a mill on Vancouver Island, British Columbia, that produces K106 soft pulp from red cedar. The output from Harmac Pacific’s plant south of Nanaimo is shipped to 3M in Minnesota for use in N95 respirators and medical gowns. It’s little-known linkages such as this that can lead to unlikely corners of the economy being designated as ‘essential’.

Mention was made in an earlier ‘Trenches’ report of a possible eventual recovery in milk sales. In the immediate present, though, sweeping school closures have cut the legs out from under milk demand. Milk is a perishable product and there are unsettling-to-watch videos on social media of milk trucks backing onto fields and letting loose their loads.

The same goes for cut flowers. In central distribution warehouses and in now-shuttered florist shops, untold millions of roses, tulips, lilies, etc. are being discarded.

When ten million Americans have become unemployed in two weeks and you’re continuing to make economic forecasts, you’re engaging in ‘cowboy’ economics. You’re shooting from the hip. You’re singing songs about tumbleweeds. You’re up on Boot Hill with ‘The Bad’ and ‘The Ugly’, while ‘The Good’ has ridden off into the sunset.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – April 7, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.