It’s ‘wishful thinking’ to believe the economy will get back to normal soon, says winner of Forecaster of the Month contest

The Great Pandemic Recession won’t be over anytime soon, says Aneta Markowska, chief financial economist for Jefferies Group and the new leader of the team that won the Forecaster of the Month contest for economic data released in April.

A pandemic is a “massive shock that causes unprecedented damage,” she says. “It won’t blow over quickly — it’s not like a natural disaster like a hurricane or an earthquake.”

While everybody hopes everything gets back to normal as soon as possible, “it won’t be over anytime soon,” she said. Expectations that the economy could substantially reopen this summer are “wishful thinking.”

That’s not to say we’ll lose 20 million jobs every month. “The worst of the economic data is probably the April data,” she said. “It’s hard to get much worse than having the economy shut down.”

Choppy recovery

The economy should look a bit more lively over the next few months as more businesses reopen, but it’ll be a choppy recovery, with the economy not returning to its pre-COVID level of activity for two more years, she says:

One year to develop a vaccine, and one year to rebuild the economy, rebuild the businesses and rehire the workers.

Massive unemployment should persist. She expects to see “mini-cliffs” of renewed layoffs and business failures later in the summer after the support programs enacted by Congress either expire or run out of money.

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Returning to full employment could take four years, she says. Which means interest rates are likely to remain extremely low for many more years as well. And, even though government debt will soar, inflation still won’t be a big concern.

“This is a disinflationary shock,” she says.

Breaking news:Consumer prices post biggest decline in April since 2008

Succeeds a legend

Markowska just stepped into her leadership role at Jefferies after four years as deputy chief economist at Cornerstone Macro and 11 years at Société Générale, where she was chief U.S. economist.

Markowska succeeds the legendary Ward McCarthy, who retired from Jefferies in mid-April. McCarthy, who says he wants to “fade into the sunset,” declined to be interviewed for this article. Understandable; he’s earned it.

McCarthy did what everybody wants to do: Go out as a winner. He led the Jefferies team to the front of the pack in the Forecaster of the Month contest, and then passed the baton onto Markowska and quietly stepped aside.

McCarthy was chief financial economist for Jefferies for nearly 11 years. He was chief financial economist at Merrill Lynch for five years in the late 1980s, and then he co-founded the well-regarded Stone & McCarthy Research Associates in 1989 with Ray Stone. They had 20 pretty good years.

Psychology, not economic fundamentals

Markowska readily admits that she and other economists are largely flying blind trying to forecast how deep and long-lasting the damage from the coronavirus pandemic will be. “The models go out the window. None of this is driven by fundamentals.” Instead, the downturn is dictated by the virus, the government orders, the psychology of people, and the complicated second-order effects of trying to put the economy into a temporary coma.

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Psychology will be the most important factor dictating the course of the pandemic and the economy.

“I could see it going either way,” she says. In one scenario, people get fed up with being cooped up and decide to live their lives as normally as possible without regard to the virus. In the other scenario, people are careful and conservative about getting infected or spreading the disease to their family, friends, neighbors, co-workers and strangers they meet.

Of course both views will co-exist; the question is which attitude will dominate.

Jefferies’s forecasts

Number as reported*




Nonfarm payrolls



Trade deficit

-$42.5 billion

-$39.9 billion

Retail sales



Industrial production



Consumer price index



Housing starts

1.250 million

1.216 million

Durable goods orders



Consumer confidence index



New home sales



Gross domestic product



*Subject to revisions

Competing against 42 other teams in the April contest, the Jefferies team of McCarthy, Markowska and Tom Simons had the most accurate forecasts on two of the 11 indicators that counted in the contest: The ISM manufacturing index and new home sales. On three others — gross domestic product, industrial production and housing starts — their forecasts were among the 10 most accurate.

See also

The runners-up in the March contest were Ryan Sweet of Moody’s Analytics, Stephen Stanley of Amherst Pierpont, Greg Daco’s team at Oxford Economics, and Douglas Porter’s team at BMO.

The MarketWatch median consensus published in our Economic Calendar includes the predictions of the 15 forecasters who have earned the most points in our contest over the past 12 months, plus the forecast of the most recent winner of the monthly contest.

The forecasters in our survey are: Christophe Barraud of Market Securities, Ryan Sweet of Moody’s Analytics, Jim O’Sullivan of TD Securities, Seth Carpenter’s team at UBS, Andrew Hollenhorst of Citigroup, Peter Morici of the University of Maryland, Ian Shepherdson of Pantheon Macro, Richard Moody of Regions Financial, Brian Wesbury and Bob Stein at First Trust Advisors, Lou Crandall of Wrightson ICAP, Michelle Meyer’s team at Bank of America, Jay Bryson’s team at Wells Fargo, Stephen Stanley at Amherst Pierpont, Robert Brusca of Fact & Opinion Economics, James Sweeney’’s team at Credit Suisse, and Aneta Markowska’s team at Jefferies.

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