The World Health Organization (WHO) officially declared the coronavirus outbreak a global pandemic on March 11th, as the outbreak has now spread to 100+ countries. Total infections outside of China are accelerating, with the global infection toll surpassing 200,000 as of March 18, with China’s contribution at more than 81,000. As coronavirus spreads at the community level, public health policies are shifting from ‘containment’ to ‘delaying’ and/or ‘mitigation.’ This approach accepts the idea that the virus will spread in society and emphasizes slowing the speed and scale of the diffusion process. Coronavirus Triggers a Global Recession in the First Half of 2020. This article is brought to you by Car Title Loans California.
J.P Morgan economists’ views on the economic consequences of the virus shock have evolved dramatically in recent weeks concerning the severity and duration of the outbreak. J.P. Morgan Global Economics Research now expects the global economy to experience an unprecedented contraction during the first half of the year as containment measures are driving deep collapses in monthly economic activity.
Assessing the Fallout- A Global Recession
The U.S. economy is projected to contract by 14% in the second quarter, after experiencing a 4% contraction in the first quarter, before recovering to 8% and 4% growth in the third and fourth quarters. Euro area GDP will suffer an even deeper contraction, with double-digit declines of 15% and 22% in the first and second quarters, before rebounding by 45% and 3.5% in the third and fourth quarters.
“There is no longer doubt that the longest global expansion on record will end this quarter. We now think that the COVID-19 shock will produce a global recession, as nearly all of the world contracts over the three months between February and April,” said Bruce Kasman, Chief Economist at J.P. Morgan. Initially, the expectation was the novel-recession may generate limited labor market damage, but J.P. Morgan Research is now forecasting the unemployment rate for developed markets as a whole will rise 1.6 percentage points in the next two quarters.
“The rise in unemployment will be sharper in the U.S. than in the Euro area. Most immediately, U.S. initial jobless claims should spike above 400,000 in the coming weeks,” said Michael Feroli, chief U.S. economist at J.P. Morgan.
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Coronavirus and Global Airline Travel
Countries and territories around the world have imposed travel restrictions to curb the spread of the coronavirus. The latest restrictions come from the president of the European Commission. He is proposing a 30-day ban on non-essential travel into the bloc.
On March 11th, the U.S. barred the entry of all foreign nationals who had visited China, Iran, and a group of European countries during the previous 14 days. In China, most new arrivals in Beijing must now undergo a 14-day quarantine. Usually at a designated hotel or other assigned location. In Europe, many countries have imposed a full-suspension on all flights arriving and departing. Additionally, borders are closing around the world.
“The collapse in air travel demand brought on by these severe travel restrictions. The reluctance of travelers to fly has the potential to materially reshape global aviation. Even more than the events of September 11th” said Jamie Baker, U.S. Airline and Aircraft Leasing Equity Analyst at J.P. Morgan.
North America drives one-fifth of global activity but generates two-thirds of global profits. This implies that airline failures may solely occur elsewhere. Thereby, paving the way for higher international margins for the North American ‘Big Four’ (Air Canada, Delta, American, and United). 2019 already witnessed a record number of airline failures despite a favorable fundamental backdrop.