March 26, 2020
“The first week of March was probably the best in the history of the United States economy,” Peter Linneman told the 4,000-plus attendees who logged in for Wednesday’s “Navigating the Market” webcast from Walker & Dunlop.
Subsequently, the public and private sectors began taking steps to address the growing threat of the coronavirus. The result was that discretionary spending, which represents between 30% and 40% of the economy, “is shut down.”
With Walker & Dunlop’s projections showing more than 650,000 COVID-19 patients across the U.S. requiring hospital beds by late June, one question is where to go and how to proceed from here. Walker & Dunlop CEO Willy Walker said the public sector needs to come up with a plan.
“If government wants to get on the front foot of this, they need to start immediately,” he said, and that includes wide distribution of testing kits, which have yet to materialize in the numbers promised weeks ago.
Past that, there’s the issue of how long the U.S. economy can withstand the current status quo. Among other effects, it’s leading to furloughs and layoffs in a variety of industries, and prompting economists to predict a sharp drop in GDP.
Walker cited two opposing schools of thought: Bill Ackman’s proposal to arrest the virus’ spread by shutting down everything for a month, and the argument that Americans should begin returning to work full-time within the next couple of weeks.
Leaning more toward the latter argument, Linneman warned that the pre-coronavirus workforce of around 150 million actively employed Americans could drop by 50 million if the shutdown continues for months.
The question is, the Linneman Associates founder said, ”how much of a price is society willing to pay in terms of unemployment and lost income?” He added that the longer the shutdown continues, the more prolonged the recovery will be.
With it all, though, the financial markets are functioning at a considerably higher level than they did immediately after the 2008 capital markets collapse, Walker pointed out. On-demand replays of the webcast are available by clicking here, and Walker & Dunlop is planning a follow-up webcast next week.
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