DURHAM – The COVID-19 crisis that has led to more than 12 million Americans filing for unemployment has hammered business leaders’ confidence about the immediate future of the US economy.

In a new Duke University survey of finance executives and chief financial officers out this morning, the CFO Optimism Index fell to 42 on a scale of 0 to 100. Attitudes have not been that sour since the “Great Recession” and the financial crisis of 2008-9. The index stood at 58 in the previous survey, which is conducted quartertly.

Optimism also fell sharply among execs elsewhere around the world.

But will there be a depression stemming from the current recession that more than 40 economists said last week has already begun? The International Monetary Fund added to the gloomy future forecasts on Tuesday, projecting an extended economic “lockdown.”

Duke finance professor John Graham, who is director of the survey that has been published for more than 20 years, says that despite the wrecking of the economy there is hope.

Optimism plummets worldwide

Duke CFO graphic

In an exclusive interview with WRAL TechWire, Graham talked about the survey’s findings.

  • You said  “The index has proven to be a good predictor of future GDP and unemployment, anticipating that the economy will perform as  poorly in 2020 than during the Great Recession.”​ So are we headed for a depression?

No. We are experiencing a sharp and rapid decline, and I expect the recovery (or at least the bottoming out) to be faster too. Most depressions and deep recessions take longer to occur and also take longer to recover.

Plus, we know in this case that the ‘end date’ is at most 18 months out (versus a depression, when there is no clear end date, so when you are in the middle of it, it’s hard to see any light at the end of the tunnel).

  •  How important is a quick reopening in your opinion to stave off further economic damage?

We must balance the economic damage from a closed economy with the personal and health costs of reopening too early.  I suspect that the outcome will be to reopen moderately soon, not too soon but not too far in the future.

  • Will executives be willing to restart their businesses or ramp back up even without a vaccine which could be 18 months away?

I think it depends on the antibody tests (that tell us who has already been exposed and hence won’t get sick if exposed again). If we find out that shortly after the peak, 70% of people have already been exposed (so only 30% can still be infected at a later date) as some studies in Europe seem to imply, then I’d think ramping back up moderately quickly seems plausible.

Of course, citizens need to feel comfortable going to restaurants, to the mall, to the movies, etc, for the rebound to really kick in.

If we find out that the majority of people have not been exposed yet, then I’d imagine that businesses will try to reopen in a “safe” and less aggressive manner.

  • Why was there such a rapid shutdown and millions of layoffs when swin flu and seasonal flu have infected and led to the deaths of more people?

Because of how rapidly this virus spreads and how severe the consequences are for those affected badly. Many of the jobs lost this time are in restaurants, nail salons, etc. because of the ease of transmission – and the need for social distancing.

International Monetary Fund: Economies are plunging, only cooperation can stem the losses