The U.S. economy has been doing very well lately. The unemployment rate, under 4% for the last two years, has just been reported to be a continued low of 3.5% for February 2020 and, moreover, 273,000 jobs were added last month.
There’s other good news to report about the economy as well (coming soon!) but, of course, we also have the coronavirus to contend with at the present time. How should we evaluate the coronavirus threat? Consider:
- During the 2019-2020 flu season so far there have already been about 14,000 deaths in the U.S. Typically there are from 12,000 – 61,000 flu deaths in the U.S. each year.
- So far there have been 17 coronavirus deaths in the U.S., including 14 in Washington State 1 in California and 2 in Florida.
The most likely course of a coronavirus recession is steep but very short:
- The DJIA has plunged 3500 points since February 19 or 12% of its value. This represents good buying opportunities for savvy investors like Warren Buffett.
- The price of oil has dropped 33% in the past two months, from $63 per barrel to $42. This is great for consumers even though it is not so good for producers.
- Ten year Treasury bonds are now yielding less than 1% annual interest, a very low rate. Investors are unlikely to continue to tie up money for 10 years at such a low rate.
- 30 year home mortgages are now available for 3.29%, again very low but good for home buyers.
Conclusion: Most reactions to the coronavirus threat have been quick and dramatic. Very soon, within a few months or less, the long term threat is likely to fade and the U.S. economy will bounce back to its previous growth mode, by continuing to exhibit strong consumer spending.