Dow Ends 11-Year Bull Market as Coronavirus Defies Economic Remedies – The New York Times

“I don’t think it’s something that conventional fiscal and monetary policy can solve,” said Lewis Alexander, chief U.S. economist at Nomura Securities in New York. “It’s not like if you just write a big enough check everything will be fine.”

The decline in March could be a preview of larger confidence losses to come. The poll was conducted last week and completed on Sunday, before stock markets dropped 8 percent on Monday in a single day of virus-driven losses.

Adding to the challenge, the people most at risk of losing their jobs or hours are mostly service workers: hotel housekeepers, airport vendors, waiters and waitresses. Those workers are less likely than white-collar workers to have paid sick leave, and they are less likely to have the financial resources to weather a period of reduced income. That could worsen the impact on consumer spending, said Michelle Meyer, chief U.S. economist for Bank of America Merrill Lynch.

The experience in other countries offers lessons for the United States. China appears to have been able to get its outbreak under control, but only through shutting down vast regions of the country. South Korea has won plaudits for its decisive response, but that too required huge disruptions to daily life and commerce. In Italy, the outbreak spiraled out of control until the country was forced to impose broad restrictions on movement.

“The virus is beatable, but the measures that are required to beat it are economy killers,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics, a research firm.

The only way to kick-start the economy after such a vast disruption, Mr. Shepherdson said, was through a “blockbuster fiscal response.”

There is little evidence so far that such a response is coming. Mr. Trump is weighing a temporary elimination of the payroll tax, a measure with a big dollar figure — it could cost nearly $700 billion — but that would put only a trickle of extra cash into workers’ bank accounts. For people who lose their jobs as a result of the outbreak, a payroll tax cut wouldn’t help at all.

Democrats are preparing their own plan featuring paid sick leave for affected workers as well as breaks on federal student loans and mortgages, block grants to help communities, and assistance to help public transit systems stay in operation. Negotiations between the parties have hardly begun.

The United States, unlike Europe, was on fairly firm economic footing before the virus hit. Unemployment was near a five-decade low, consumer spending and the housing market were strong, and overall growth was slowing but still solid. That should give the economy some cushion against the virus.

But cracks were showing even before the crisis. The trade war hurt manufacturers and farmers, leaving the economy even more dependent on consumer spending. The Federal Reserve last year cut interest rates three times to try to keep the expansion on track.

“The economy was already on its back heels coming into this year,” Mr. Zandi said. “All it was going to take was a shove to put the economy on its back, and it just got a body blow.”

Matt Phillips and Jim Tankersley contributed reporting.

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