Could the Coronavirus cause a global recession? Is this what’s on the horizon? Many experts think that’s the case. If so, is there a way to be of service to others that are victims of the recession and to continue your successes? I think so.
- Did you know that the swine flu outbreak in 2009 is what perpetrated the effects of the financial/mortgage crisis making it the worst recession since the Great Depression?
- Did you know that recessions are almost always triggered by an unforeseen event?
- Did you know that on average there is a significant recession at least once per decade and lasts 1-2 years?
- Did you know that online businesses and traditional business growth are inversely correlated?
Let’s look back at the last major outbreak of a similar virus. According to Wikipedia, the Mexican swine flu—which unlike the Coronavirus was NOT highly virulent—lasted about 18 months. It began in March of 2009 in Mexico and began to taper off by November of 2009. By May of 2010, the number of cases was in steep decline and by August of 2010, the WHO announced the end of the H1N1/Swine Flu pandemic. According to the WHO, the epidemic killed about 15,000 within the first 12 months, while the previous Coronavirus outbreak (SARS in 2003) killed less than 1000 people worldwide.
So how did Swine Flu affect the economy back in 2009?
Bryce Sutton, a Ph.D. health economist in the University of Alabama at Birmingham (UAB) School of Business says: “The most recent case we have to study is the Asian SARS outbreak in the early 2000s, which negatively impacted a range of industries in Asia. The effects led to a regional loss of between 0.5 and 2 per cent of GDP.”
So here we are exactly 11 years later with a similar situation. However, the biggest difference is that the Swine Flu was LESS aggressive than the common flu, while the 2019 Coronavirus is significantly MORE contagious and aggressive.
There’s fear that the Coronavirus will become a pandemic. But let’s step back from fear (but please also don’t touch your face) and see the possible impact on the global economy.
First of all, by definition, it’s already a pandemic.
This week the Dr Anne Schuchat, principal deputy director of the CDC, said: “The outbreak already meets two criteria for a pandemic.” She went on to say, the WHO will likely deem the COVID-19 coronavirus a global pandemic once sustained person-to-person spread takes hold outside China. It’s now in 47 countries and has infected over 100,000. In the last week alone it’s spread from a handful of cases in Washington and California to 22 states. As of today, 2700+ people in NYC alone are self-quarantined. Let’s let this soak in, accept it, and try to see the bigger picture (while, of course, still not touching your face).
Like I mentioned on the VC yesterday, we are already seeing how this is affecting people’s day-to-day behaviour in countries like Canada. I was unable to get a taxi or Uber and had to walk to the downtown airport in Toronto yesterday! Yes, I also missed my flight. Those that know me well, know that’s not out of character though.
Second, will this trigger a global recession? The short answer: it’s not only possible, but it’s also actually quite probable.
Why? Let’s take a look.
-There have been rumblings of a potential 2020 recession for close to a year already. In November 53 forecasters surveyed by the National Association for Business Economics predicted growth of 1.8% in 2020, down from an expected 2.3% in 2019, with recession odds rising to 43% by the end of 2020.
-Exactly half of a panel of more than 100 real estate and economic experts said they expect the next recession to begin in 2020, with another third (35%) predicting the next recession to begin in 2021.
This prediction was based on the assumption status quo would be the baseline, before China was slammed with Coronavirus.
-Finally, we’re overdue for a correction, economically speaking. We are now well over a decade since the last recession and global stock markets have more than doubled since then.
What is a recession and what does it mean for me?
A recession occurs when there are two or more consecutive quarters of negative economic growth. As companies struggle with less cash and revenue, they first try to reduce their costs by lowering wages or ceasing to hire new workers, which can stop employment growth.
Even though job growth continues to be brisk, with the average monthly growth of 184,000 in 2019, this number is what economists call a “lagging” indicator. (Today’s US jobs report for Feb beat expectations soundly with over 284,000 new jobs created. Yet, at this moment of the end of the first quarter of 2020, the DOW Jones is down 730 points. It dropped 1000 points yesterday alone.)
AAA estimates that as many as 60 million Americans annually travel 50 miles or more from home during the country’s peak travel periods. Sutton says airlines, hotels, and other service industries negatively impacted by recent trends of tightened consumer spending could face double jeopardy should fears of exposure keep would-be travellers at home.
Other business sectors would suffer, too, if sick workers and absences cut deeply into productivity and revenues.
“Although business managers have had time to prepare contingency plans, those that already have cut the numbers of employees in an effort to reduce costs during the downturn may be hardest hit,” Sutton says. “In many cases, companies that already are working with the bare minimum staffs face further productivity challenges should large numbers of the remaining employees be affected.”
In 2009 the effects led to a regional loss of between 0.5 and 2 per cent of GDP. Impact predictions are based on examples like this in which virus fears traditionally have had a negative influence on the economies of impacted regions.
In summary, if the economists are correct in saying that the 2009 Swine Flu caused the economy to shrink 0.5% to 2.0%, is it reasonable to think that we’re in for the same, if not something much worse in 2020? I think it is understandable.
How can there be an upside to this?
There’s no “positive spin” on sick people and a global recession. Let’s be clear on that. With that comes suffering and loss in every way possible. This is undeniable. But knowing what I know about basic economics and my own business, I’m faced with the urge to do something. And what I know how to do is my business. So my proposition is this.
Our mission with Mentors and WAKEUP is to be a place where rationality and perspective are not only maintained but done so in a positive and helpful way.
Although it’s impossible to predict anything as fluid as a pandemic and its economic results, instead of going straight to the grocery store to panic-buy all the toilet paper rolls, but also taking contagious illness seriously (maybe it’s been a while since you’ve washed your hands? Just a friendly reminder) we’re committed to being a voice of reason especially in times of uncertainty like this. Let’s calm ourselves, stay healthy, and help each other.
Here are the conclusions I’ve drawn after missing my flight yesterday and experiencing firsthand how quickly the world reacts in fear.
We know from history that with every major crisis there is usually an equal if not greater opportunity created on the flipside for some. Could the same be one thing I’m certain of is this: people are going to be looking for alternate ways to support themselves financially from home now more than they did in 2009. right here? From my personal experience and perspective, I certainly think so.
Here’s what happened last time around.
Between the fall of 2008 and spring of 2009, my personal affiliate marketing business absolutely exploded. My company, CarbonCopyPRO went from 500 monthly subscribers to 2500 in a matter of six months. At the time, I really had no clue what was behind the sudden surge in business but in retrospect, it’s obvious what happened.
Similarly today I heard that Zoom, the video conferencing company we use, has doubled their users since the Coronavirus started to spread in China. And it makes sense. Today Google, LinkedIn, and Twitter all asked their employees to work from home, as a cruise ship with 5000 people sits just off the shore in San Francisco with dozens of people sick. They’re being responsible companies and asking people to stay safe and healthy, but also asking them to use Zoom to communicate with one another instead of face-to-face, which could easier spread the virus.
This is a nuanced situation and it should be treated as such. At the end of the day, this will probably come and go without being the apocalypse. Regardless, this isn’t going anywhere fast. A vaccine is likely over a year away.
One thing I’m certain of is this: people are going to be looking for alternate ways to support themselves financially from home now more than they did in 2009.