On the heels of reports on how hard the United States economy was hit in the first quarter of the year along with new and greater unemployment numbers and predictions that the next quarter will also be produce depressing statistics, I thought on this Friday it would be good to see there are new optimistic projections on the state and national economies from different economic experts. 

While California economist Christopher Thornberg and his Beacon Economics team argued in a new report that the structure is in place for a V-shaped rebound of the economy, former Californian and well-known economist Arthur Laffer teamed up with Stephen Moore to produce a paper that also boasts America’s opportunity for a rebound. Laffer and Moore went further suggesting that California is one of a handful of states that must come back to uplift the entire U.S. economy. 

To be sure, both economic papers point out the challenges of making predictions on the economy at this stage. Similarly, both expect a rough second quarter for the U.S. economy. But then they see the potential for a brighter future.

Thornberg and Beacon Economics said most of the fiscal prognostications are grim because there is very little data to relay on, while we are living through an extraordinary time of early school closures and empty streets.  But the report also argues that what we are experiencing now is nothing like the Great Recession of more than a decade ago. That is because, “The vast majority of people currently applying for unemployment are being laid off from profitable, sustainable businesses that have been shuttered temporarily as a result of public health mandates.”

Because the United States is less dependent on global trade and supply chains than other developed countries and because the service economy is not dependent on inventory buildup, the Beacon economists envision a pent-up demand from the greater portion of the economy with money to spend post-crisis bringing the country back relatively rapidly in a V-shaped effort—meaning the economy dropped precipitously with the onset of the pandemic and it will zoom ahead once the crisis is controlled to a satisfactory degree. 

One unknown Thornberg raises is whether post-crisis consumers behavior will change dramatically. “Will consumers stop going to ballgames and music festivals?” the report asks. Yet, Thornberg and Beacon made it clear what they think will happen by titling their report, The Post Covid-19 Economy: A Case for the “V.”

Meanwhile, the Laffer-Moore study released at the same time concluded that “the right policy prescriptions and states opening up for business quickly, we will see a very sharp contraction this summer with high unemployment followed by a strong recovery that will arrive within six months.” 

Like Thornberg, Laffer and Moore have caveats to watch for if the economy is to make a swift comeback. They warn that a bail out of the states would have a large negative effect on the economy. They also see a possible second shutdown of the economy as having a huge negative effect if it comes to pass.  But they still see the possibility of a recovery before the end of the year.

And, an economically healthy California opened for business would be a cornerstone of the national recovery.

Laffer and Moore concluded there report this way: “A strong national economic recovery will be inhibited if California, Illinois, Michigan and New York keep their economies shuttered into the summer months. These four states alone account for about one-third of the national output. ALL states would benefit mightily if California, Illinois, Michigan and New York open sooner rather than later.” 

Different economists with varying philosophies both see a light at the end of the dark, economic tunnel. A little optimism to carry us through the weekend.