US economy can recover faster than the Eurozone, say macroeconomic influencers

13 July 2020 (Last Updated July 13th, 2020 08:07)

US economy can recover faster than the Eurozone, say macroeconomic influencers

As the recession induced by Covid-19 affects the world economies, economists recall the situation caused by the 1918 flu pandemic. Although the June economic data suggests that the US economy has improved, emerging trends suggest that the situation is getting worse again.

However, Daniel Lacalle, chief economist at Tressis Gestion, is upbeat about the recovery in the US compared to the Eurozone.

Daniel Lacalle

Daniel Lacalle, in one of his latest live shows, opined that the economic recovery in the US will be better than that of Eurozone, where demographics, high taxes, and bloated government spending work to a disadvantage.

Daniel believes that US will outperform the Eurozone over the long run despite the temporary setbacks caused by Covid-19.

Brad DeLong

Brad DeLong tweeted about a research paper by Harvard University economist Raj Chetty and his Opportunity Insights colleagues who emphasised the necessity of enhancing social insurance in the US during the recession induced by Covid-19.

Consumer spending in the US declined significantly in the last few months due to Covid-19 health and safety concerns, causing a dip in in-person services purchase by people, especially those high-income groups. Considering that in-person services account for 66% of all consumer spending, a rebound in the services is crucial for the overall recovery in spending.

The research has found that households in the top 25% of the income distribution accounted for two-thirds of the reduction in credit card spending over the first five months of 2020. On the contrary, household spending in the bottom quartile returned to normalcy.

The research team suggests that fixing the public health crisis in the country is a must to fixing the US economy, rather than just reopening the economy.

The research also found that investing in social insurance programs would help mitigate the economic crisis better compared to stimulus measures that would benefit businesses. Further, the paper suggests that the situation calls for increased government spending, creating employment in healthcare, and taking steps to improve investment spending.

David G. Blanchflower

Economist David G. Blanchflower shared an article that says real-time economic indicators suggest that just after two months of rebounding, the recovery from the recession due to Covid-19 is levelling-off.

The article quotes Neil Dutta, head of economics at Renaissance Macro Research, who said that real-time economic data shared by certain government and private sources indicate that the economic condition is worse, following an uptick in the June economic data.

The US government data shows that 4.8 million jobs were added in June, whereas the latest trends suggest a flattening or a downtrend.