Assessing the impact of the coronavirus, election on aggregate demand

By |  October 5, 2020
Source: SC Market Analytics

Click to enlarge | Source: SC Market Analytics

We are in a V-shaped recovery for now.

While we have a long way to go before returning to peak values from the beginning of 2020, the economy is growing rapidly. Whether the recovery remains rapid depends on a couple of things: the virus and the election.

1. The virus. The assumption in our base case is that an effective vaccine will be available by the beginning of 2021 – possibly even sooner. Effective therapeutics will probably also be available by early 2021.

If this occurs, the recovery will continue in a V-shaped path and the economy will return to normal. If the vaccine does not become available until after 2022, the recovery will slow by about 25 percent over two years. That’s still positive, just slower growth. We base this on the fact that many cities will not return to normal unless a vaccine is available.

2. The election. This a sensitive subject. Remember, we are not rooting for President Trump or former Vice President Joe Biden. At SC Market Analytics, we are simply looking at policy differences.


Click to enlarge. Source: SC Market Analytics

During the next two years, the Trump path is the faster one as the pro-growth policies will continue. This will keep taxes low and promote U.S.-based manufacturing and energy production.

A Biden win means higher taxes for most people, less fracking and fossil fuel production, and a bigger push for alternative energy sources. California is leading the way in alternative energy production, and its electric and gasoline prices are 50-plus percent higher than most U.S. areas.

In addition, there will be less of a push for U.S.-based manufacturing and more international cooperation on trade with a Biden win. The net impact on the economy is to slow it somewhat, as businesses and consumers adjust to changes.

Big picture

Combining the election with the arrival of a vaccine produces a four-way table (see top chart) of outcomes ranging from a low of 0.5 percent growth in aggregate demand over two years to a 1.7 percent gain over two years. Expect a slowdown in the Biden/no vaccine scenario compared to the Trump/no vaccine scenario because Biden is more likely to put more restrictions on business activity than Trump.

These scenarios also assume Republicans remain in control of the Senate. If that turns out not to be true, the outcomes are more extreme.

All of these are scenario-based outcomes based on policy changes and vaccine conditions. No judgment is made as to the desirability of any of these outcomes – that is up to the voters and the scientists.

Regionally, the states will be impacted in very different ways. A Biden win means more state and local money to help with their budgets. This will help New York, Illinois and California the most. A Trump win means Texas, the Midwest and the Energy Belt will do better.

In all scenarios, the movement away from high-density U.S. cities will continue due to a variety of factors.

David Chereb, Ph.D., is with SC Market Analytics (SC-MA), which produces customized market forecasts by major segment of construction, from the county level up. Clients use SC-MA market intelligence reports for business planning and acquisition analyses in aggregate, ready-mixed concrete and cement. For more information, visit

Featured photo: P&Q Staff

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