Watch CBS News

Economists are increasingly worried the coronavirus could cause a recession this year

Economist: Coronavirus recession "likely"
Coronavirus recession is "likely," economist says 03:56

A growing number of economists think the rapid spread of the coronavirus could push the U.S. into recession this year as the outbreak increasingly disrupts the economy.

Moody's Mark Zandi on Monday increased the odds of a downturn — usually defined as two straight quarters of shrinking economic growth — to about 65%, up from about 50-50 only a week ago. "I think it is very difficult to avoid a recession," he told CNBC Monday. "The depth of the recession will depend on how the [Trump] administration reacts."

Zandi isn't alone, with other prominent experts sounding the alarm. Larry Summers and Jason Furman, who were economic advisers to President Barack Obama, also think a recession is likely. The concerns have been magnified this week by Thursday's historic plunge on Wall Street and a slump in oil prices. Here's a rundown of prominent economists who are now using the "R" word:

Nouriel Roubini

U.S. economist Nouriel Roubini in 2010. OLIVIER MORIN/AFP/Getty Images

Why he's important: Roubini is a top economic forecaster and a New York University professor. In 2008, he was one of the first to predict that the big bust in housing prices would cause a financial crisis and a recession.

Chance of recession in 2020: 95%

What he's saying: Roubini, once known in media circles as "Dr. Doom," is again living up to his nickname. On Monday, he tweeted that plunging oil prices would tip the world into global recession. At the time, he put the chance of recession at 66%. By Friday Roubini had upped his recession prediction to 95%. Roubini said a financial crisis resulting from a one-two punch of the coronavirus and a sharp drop in oil prices would be worse than the credit crunch of late 2015, which caused dozens of oil and gas drillers to go bankrupt. "Only issue is whether it is a two-quarter recession, almost surely so, or a three- or four-quarter one," Roubini told CBS Moneywatch. 

Larry Summers

US National Economic Council (NEC) Direc
U.S. National Economic Council Director Lawrence H. Summers gestures during a session at the World Economic Forum on January 27, 2010. FABRICE COFFRINI / AFP

Why he's important: Summers was Treasury Secretary under President Bill Clinton and was also a top economic adviser to President Barack Obama during the 2008 financial crisis.

Chance of recession: 80%

What he's saying: Summers said this week that the Federal Reserve's recent move to lower interest rates won't be enough to halt a coronavirus-led economic slide. He also urged the Trump administration and Congress to move quickly to ink a bill aimed at shoring up the economy. "We cannot afford to wait six months now for fiscal stimulus for this economy," Summers told Bloomberg on Thursday. "We're going to need bolder and more experimental approaches, and critically we're going to need much more aggressive fiscal policy."

Jason Furman

Jason Furman stands on stage as President Barack Obama announced him as the new deputy director of the National Economic Council, during an event at the Thompson Creek Window Company in Landover, Md., Friday, Jan. 7, 2011. AP Photo/J. Scott Applewhite

Why he's important: Furman is a Harvard University economics professor who was the top economic adviser to President Barack Obama, serving as chair of Council of Economic Advisors from 2013 to 2017.

Chance of recession: High

What he's saying: Furman told Vox the coronavirus could do more damage to the economy than the 2008 financial crisis. As a result, he wants the Fed and officials in Washington to pull out all the stops to shield the economy, including pass a stimulus bill pronto. "Even if you discover a cure in December, you still have people out of jobs, broken balance sheets, bankrupt companies that won't be particularly eager to hire," he said.

Mark Zandi

Mark Zandi of Moody's Analytics joins CBS' "Face the Nation" for a panel discussion that aired June 26, 2016.

Why he's important: Zandi, a John McCain campaign adviser in the 2008, served as an economic adviser to President Barack Obama during the financial crisis. These days, he is seen as a leading economic forecaster and heads research firm Moody's Analytics.

Chance of recession in 2020: 65%, up from 50% last week

What he's saying: Zandi thinks the Federal Reserve will soon have to slash its benchmark short-term interest rates to zero, which is what it did as the financial crisis erupted in 2008. But that alone is unlikely to pull the economy out of a recession, just as in 2008. Zandi said we will likely need a stimulus package from Congress that President Donald Trump is willing to sign. "How deep the recession is will matter on the response of the administration," Zandi told CNBC.

Zandi thinks falling oil prices aren't the worst of it. He said the drop in gas prices within nine months will likely neutralize the effect of any layoffs from U.S. drillers and oil producers. The main problem is the forced slowdown of economic activity because of efforts to contain the coronavirus. 

"Corporate managers are going to be very cautious and reluctant to let people travel and go back to normal," Zandi said. "In the travel and retail market, I suspect we are going to see layoffs pretty quickly."

Kenneth Rogoff

Harvard economics professor Kenneth Rogoff 

Why he's important: Rogoff is a Harvard economics professor who among other achievements co-wrote a highly regarded book on the history of financial crises. He correctly predicted that the fall of Lehman Brothers would cause a prolonged recession.

Chance of recession in 2020: 50-50 for the U.S.

What he's saying: Rogoff believes policy makers should start planning for a global recession. The biggest problem is that the outbreak and resulting fallout is hitting the global economy as growth was already slowing. 

What's more, Rogoff wrote last week, a coronavirus-driven downturn could be even worse than the Great Recession because it will hit supply chains, hurting a range of businesses, as well as sapping consumer demand. And if tens of millions of people are unable to get to work, that will make it difficult for companies to operate and continue to produce goods and services, he added.

"The new coronavirus, Covid-19, implies a supply shock as well as a demand shock," he wrote. "Policymakers and altogether too many economic commentators fail to grasp how the supply component may make the next global recession unlike the last two."

Ethan Harris

Why he's important: Many economists don't expect a recession this year, it's worth noting. Harris, head global economist at Bank of America, is one of them. He has long been regarded as one of the best forecasters on Wall Street and was one of the few economists at a major bank who predicted a recession in 2008.

What he's saying: This week alone, Bank of America analysts have twice cut their economic outlook for the year. On Friday, the firm's top U.S. economists told clients in a note that the economy is "flirting with recession." Harris also expects global economic growth to fall to its slowest pace since 2009, although he thinks the U.S. can still narrowly dodge recession. Overall, Bank of America is forecasting U.S. growth this year of 1.2%, down sharply from 2.3% in 2019

Harris does see a significant risk that a coronavirus-fueled slowdown could create "severe financial distress" for some companies and their workers. But he thinks the best remedy for that would be some kind of government assistance program, not lower interest rates courtesy of the Fed.

"The bottom line is that investors should not be counting on central banks to save us from the virus shock," Harris wrote in a recent note to investors last week.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.