How to Gauge the World’s Economic Recoveries
As we noted recently, the world is preparing to reopen its economies. In the U.S. and elsewhere, this is going to mean a lot of difficult decisions, and it’s possible that it could bring some troublesome trends into the light. The road ahead, after a collapse of this magnitude, will inevitably be a bumpy one.
Nevertheless, the world’s economies need to start along that road at one point or another. And as we move forward now with businesses and consumer activity beginning to pick up, many will be attempting to gauge the effectiveness of various recoveries. There won’t be a comprehensive way in which to do this. But for those looking to assess the U.S. recover and/or compare it to others around the world, these are some of the things to pay particularly close attention to.
A recent look at unemployment in G7 countries suggested that the economic crisis may have cost the equivalent of 305 million full-time jobs around the world. It’s a staggering number, and one that may not be done rising (though some jobs are returning as well). But keeping an eye on how it breaks down between nations may provide some insight as to whose recovery is on the fastest track. It’s not always a fair way to compare situations, because countries are handling unemployment in completely different ways; Europe, for instance, is using massive subsidies to avoid some job losses. Nevertheless, meaningful positive shifts in unemployment could indicate early-recovery strength.
As with unemployment, currency value is not always a fair or complete indicator, but it can certainly be one sign among many of a strengthening or weakening economy. Plus, this is an easy factor to keep an eye on. Forex platforms show price changes between the world’s major currencies, with near-instant updates and chart histories available as well. These platforms can make it clear at a glance if one nation’s currency is advancing in relation to another, which could be a sign of greater trader confidence in said currency (and the economy behind it).
There is no universal number, announcement, or indicator that wholly summarizes any nation’s economic strength. However, GDP numbers (both projected and reported) may come closest to being such a thing. During the crisis, major economies around the world cut their GDP projections dramatically. As we move forward though, any nations that exceed their reset expectations or raise their long-term GDP projections will likely be among those implementing the most effective economic recoveries.
A vaccine or cure may not be a direct economic indicator — but there’s a reason governments and related companies are pouring millions into research, even when there isn’t always a good chance of success. Certainly, there’s the health factor to consider; a vaccine or cure would save an untold number of people around the world. However, there are also significant economic benefits that will be tied to the development of a successful treatment or vaccine. If one nation begins to administer such medicines even a month before the rest of the world, its economy will — in theory — be able to get back to something close to normal that much more quickly. Look for the recovery to surge wherever a successful vaccine or treatment is widely deployed first.
There will be many more indicators to factor in over time, and these recoveries may be volatile for a while. As economies start to reopen though, these are some of the signs to watch for in gauging which ones are doing it right.