Farmers should constantly run a “stress test” on their business, an economist recently told Northwest audiences.

“Can I make money if interest rates change?” asked Marci Rossell, former chief economist for CNBC. “It doesn’t mean it’s going to happen but you need to know. How sensitive are you to a change in commodity prices? How sensitive are you to the price of energy?”

Rossell spoke Nov. 12 during the Northwest Farm Credit Services 2020 Washington Ag Outlook conference.

The economy is about 5 percentage points below where it would be under normal circumstances without the pandemic, Rossell said.

The economic downturn as a result of the COVID-19 pandemic has been “fundamentally different” from any other, Rossell said. Most recessions begin in one sector of the economy and move out into other sectors, but this is a health care shock, much more like a natural disaster, that moved into the economy, she said.

It makes the downturn harder to predict and analyze, she said.

In a typical downturn, labor markets tend to be the last thing to react, a “lagging indicator,” even once a recession is over, Rossell said.

“This time around, that’s been turned completely on its head,” she said. “The unemployment rate was in some ways the recession.”

Roughly 33% of unemployed people have been unemployed for the long term, more than 27 weeks. Typically, less than 10% of people who are unemployed stay that way for the long term, Rossell said.

Each week, another 700,000 people lose their jobs and apply for unemployment benefits.

Rossell referred to historical data from the pandemic of 1918-1919 and different reactions of Denmark and Sweden to the pandemic today. The effect on the economy was exactly the same in both countries, Rossell said.

“Unless people feel safe, it doesn’t matter what governments do,” she said.

Typically, during an economic downturn, the effect is negative on both income, the amount a person is paid on a regular basis, and on wealth, the ability to save part of one’s income and have it build over time.  

This time, income has been negatively impacted by the pandemic, but wealth has gone up, Rossell said.

Typically, businesses and individuals respond to uncertainty by putting things on pause, Rossell said. 

Between March and July 2020, 80,000 small businesses closed permanently, Rossell said.

Financial markets indicate expectations that two run-off races for senator in Georgia likely won’t result in the Senate changing to Democratic leadership from Republican control, Rossell said.

Big legislation requires the House, Senate and White House all to be controlled by one party, she said.

“Things like a Green New Deal, a $2.2 trillion stimulus package proposed from the House (and) big changes to the tax code … would require the Senate to be in Democratic hands,” she said.

The stock market being up 8% indicates predictions of a divided government, she said.

“They are predicting you are going to have no big changes, no massive legislation,” she said. “If you have any division at all, what you get instead is … any changes happen on the margins through executive order.”

Rossell doesn’t expect to see another economic relief package until late January at the earliest.