If, as we believe likely, the pandemic and the associated economic crisis last into the next 18 to 24 months or more, the memories and changes in habits for individuals and companies will become sufficiently ingrained to impact behavior long afterwards. Those who lived through the Great Depression continued behavior patterns they developed at the time through their whole lives. While the current crisis, despite its short-term intensity, is not expected to linger for as long or be as severe, other shorter- term but notable crises, such as the Great Recession, 9/11, the savings and loan crisis, stagflation, the energy crisis and the like, demonstrate that behavior patterns that changed at the time remain after. The same is expected for the COVID-19 pandemic. Forecasting changes in key national economic indicators, such as GDP, unemployment and inflation must take into consideration not only the long-term patterns of recovery, but also the effects of the short-term crisis on 2020 figures. Even if the economy immediately returned to prior activity levels upon the elimination of any governmental restrictions, which it will not, numbers for 2020 would show the effects of the period of massive closures. Seasonality aside, closing a business or an industry for a week means a drop of 1.9 percent for the year, unless the lost business doubles up during recovery, which is unlikely. At five weeks, a drop of nearly 10 percent would occur without some form of bounce back. To the extent that business volume after the closure continues to fall below prior levels, just not to the same degree, the overall decline would be greater still. With reduced capacity due to new operating rules, lower business volume is inevitable. Just as current year numbers will necessarily show a significant decline even if restrictions are lifted and demand returns more quickly than expected, key indicators in 2021 and 2022 will benefit from comparison to the uniquely constrained environment of 2020 and are almost certain to be up from this year simply due to an end to the more severe restrictions. There is a difference, however, between showing growth over 2020 and returning to the levels present in 2019 before the pandemic began. None of this is to say that recovery will not occur. Even with major systemic changes, economic growth can occur and can ultimately equal or surpass prior highs. Nobody could argue that the convenience, efficiency, comfort, and perceived safety of air travel today is the same as before 9/11. Nevertheless, prior to the pandemic, air travel had long since adjusted to the new environment and reached volumes greater than before the attack. Based upon the assumptions about the course of the pandemic described previously and our analysis of economic factors, prior business cycle patterns in periods of crisis, and the likely impacts of changes in operations and customer behavior, we forecast a decline in U.S. GDP for 2020 of approximately 10.5 percent. GDP for 2021 is forecast to grow by approximately 7.7 percent in 2021 over 2020 levels but still remain approximately 3.5 percent below 2019. GDP is forecast to grow by 4.2 percent in 2022 over 2021 and finally surpass the 2019 level by 0.5 percent by the end of the year. This information is presented in the graph on the following page.
∴ PROGNOSIS
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