A tourist wears a protective mask as she carries her suitcases past a closed Nike store at Las Ramblas on March 15, 2020 in Barcelona, Spain.

David Ramos | Getty Images

As some states start to relax social distancing measures and some tentative signs point to coronavirus cases being on the decline, there’s still scant evidence of a turn in the U.S. economy.

The worst news, in fact, is yet to come, with unemployment rates higher than anything the U.S. has seen since the Great Depression and a collapse in gross domestic product also beyond anything seen since that period.

However, as those data points come in, they’ll largely tell a story about the present and the near past. What they won’t provide, at least for a few months, is a reliable portrait of the future.

Economists are wrestling with what the road ahead will look like, a picture that takes on more urgency as the economy and markets look for guideposts out of the history-making downturn.

“We’re approaching the nadir in terms of the worst being passed. That likely will happen in May, and then we’ll slowly begin climbing out of this,” said Joseph Brusuelas, chief economist at RSM. “We’re not going to have a depression. That’s a good start for what the recovery looks like.”

Still, the immediate economic numbers will look pretty bad. Thursday, for instance, is expected to see news that 4.3 million more Americans filed for unemployment insurance last week, taking the rolling total during the coronavirus crisis to more than 26 million.

At the same time, the New York Fed is tracking a GDP contraction of about 11%. Recent industrial production figures were the worst since World War II and the most recent retail sales numbers also showed a stark decline.

The recovery, then, might look different than what anyone is anticipating. For his part, Brusuelas is in the “Nike swoosh” camp that sees a more gradual, but still aggressive recovery.

“We will see people come back to work rapidly. It will take six to 12 months to unfold, but not everyone is going to get their job back, because there are going to be bankruptcies,” he said. “Depending on what industrial ecosystem one sits in, your relative recovery and expansion is going to look very different.”

Energy use, pollution and subway rides

That’s why Brusuelas is looking outside the typical indicators for when the economy actually will turn. Indicators he follows include mass transportation, pollution figures and shipping activity — “whatever we can get our hands on” — in measuring the return of activity from the catastrophic economic shutdown.

Some examples:

  • Waste removal and pickup totals
  • Airport departures and Transportation Security Administration figures
  • Energy consumption
  • Pollution measures from the upper Midwest/Chicago areas
  • Tanker shipping rates
  • Materials and packaging in New York and Tokyo
  • Subway ridership in China

Getting such real-time activity will be critical in determining how strong the recovery will be.

“Will there be a massive release of pent-up demand? No, there will not, because there’s going to be a staggered reopening around the economy,” Brusuelas said. “The economy is not just a thing that turns on and off.”

Those aren’t the only signs to follow.

Looking to Europe

More easily observable gauges of how the U.S. might come back will come even sooner as some European countries start to resume normal activity.

While there are important differences for economies separated by the Atlantic, the moves toward normalization can provide lessons in terms of consumer behavior and what the coronavirus will do after six weeks of global isolation across societies and nations.

“We might to start to get, I wouldn’t call it clarity, but slightly more information than we have now as we watch over the next few weeks what happens in places like Denmark, Norway, Austria and Germany,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “The path that they take as they start to open up is probably more relevant to the United States than what happens in China.”

Sonders said the stock market has been “looking though the valley” and pricing in a V-shaped recovery that neither the bond market nor the economic data seem to support. 

Indeed, the market practically ricocheted off its crisis lows in late-March and, while off in the early part of this week, bounced back sharply Wednesday. What’s been more unusual has been the leadership — energy shares, which are up 32% over the past month at a time when U.S. oil prices actually went negative for the first time ever, reflecting a huge supply glut and plunge in demand.

A slower than expected recovery could prove dangerous to the optimistic equity side of Wall Street.

“Most people seem to be focused on if we open too soon, there will be a resurgence in the virus and we’ll have to shut down again,” Sonders said. “But I think equally important is the question of as we open back up, what if demand doesn’t come back?”

Other pressure points

The retail industry already is under severe pressure and is likely to continue to falter through whatever share the recovery takes. 

CFRA analysts projects some 15,000 stores could close in 2020, and UBS estimates that 100,000 will shutter over the next five years. While that story is about more than the coronavirus, it reflects the changing shape of the economy that will be exacerbated by the shutdown and accompanying social distance measures that helped slow the disease but also caused what could be irreparable harm.

“Even less stringent measures could be the final straw for some businesses,” Jennifer McKeown, head of the global economics service at Capital Economics. “And the prospect of multiple peaks could cause permanent changes in consumer behavior, damaging demand well into the future.”

Unprecedented levels of government stimulus and rescue funding has helped stave off some damage.

The government is expected to unleash another round shortly, and some of the market liquidity measures are at least making it easier for companies to borrow again. Over the past month, investment-grade companies have issued $176.8 billion of new debt, about a quarter of the year’s total after the market’s seized up in the early days of the lockdown, according to Bank of America Global Research.

Still, there will be other holes to plug.

Governors are demanding still more relief from Congress, with current needs pegged at $500 billion. 

“States and local governments need robust support from the federal government as we navigate the response to this pandemic and to help foster the economic recovery that is ahead,” the National Governor Association said in a letter to congressional leaders Tuesday.

Administration officials have pledged continued support, even as the red ink continues to mount.

“We may be coming down the homestretch. Perhaps May will be a transition month to an economic open across the country,” Larry Kudlow, director of the National Economic Council, told CNBC on Wednesday. “We’re just doing our best to keep tings afloat to a point where the economy can begin to recover.”

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