Last time we talked about a couple of possible shapes for our economic recovery: A“V” recovery, in which the economy goes back up just about as quickly as it went down, and a “W” or “double dip” recovery, which is characterized by a quick upturn in the economy followed by another downturn.
Well, guess what? There are even more shapes and more possibilities. So, let’s look at those.
“U-shaped” recovery. In a U-shaped recovery, the economy takes a longer period of time to rebound and thus looks like a “U” rather than a “V” when charted.
“L-shaped” recovery. This is the least favorable recovery scenario. In an L-shaped recovery, the economy recovers somewhat but takes years to reach the level it was before the downturn. The recovery from the 2007 Great Recession was L-shaped.
“Z-shaped” recovery. In this, the most favorable scenario, the economy bounces back to above the level of the baseline set before the crisis.
“K-shaped” recovery. In a K-shaped recovery, one segment of people in the economy have nearly or fully recovered, while another either continues to experience a downturn or does not recover as quickly. This is the shape that has received the latest mention in the news.
“Swoosh-shaped” recovery. The swoosh (as in the Nike swoosh) recovery starts out like a V-recovery with a quick bounce, and then moves into a more gradual recovery over time.
Some economists are predicting that the COVID-19 recovery will be a swoosh because although the economy is opening back up, businesses, consumers and local governments are hesitant to spend so the return to our pre-crisis levels will take longer. Others have recently begun leaning more toward a K-shaped recovery.
Remember that as we all work through this unpredictable environment, we are open and ready to help.
