Comparing our experience from the Covid years, we can gain context to hopefully better understand current conditions.  

Let’s take a look.

 

Welcome to this week’s Steak House Index update.

 

If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/

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Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.   But is the US economy expanding or contracting?

Expanding … according the ‘advanced’ reading just released by the BEA, Q3, 2024 GDP grew — in ‘current-dollar‘ terms — at the annual rate of 4.7%.

The ‘real’ growth rate — the number most often touted in the mainstream media — was 2.8%.   In current dollar terms, US annual economic output rose to $29.35 trillion at the end of 2024.

According to the IMF, the world’s annual GDP will  expand  to over $115 trillion in 2025.   Forecasts suggest global GDP will continue to grow above 3% per annum.

America’s GDP remains around 25% of all global GDP.  Collectively, the US, the European Common Market, and China generate about 70% of the global economic output.  These are the 3 big, global players.   They bear close scrutiny.

 

The objective of this blog is singular.

 

It attempts to predict the direction of our GDP ahead of official economic releases.  Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.

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Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore “fun” items of economic importance.   Hopefully you find the discussion fun, too.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.

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The Blog:

 

“Uncertainty is unusually elevated.”

 

So said FED Chairman Powell just moments ago, speaking to the press at the end of the FEDs latest FOMC meeting.  

Uncertainty is a serious problem.   Uncertainty inspires fear.   Fear stops economic activity.  

Consider this question:   Might today’s economic and financial uncertainty crush the US economy?  Just how bad is it?   To answer those questions, we need to see how the current conditions compare to past crises.   Because context matters.  

It allows us to compare the known to the unknown and, through that comparison, more accurately assess current conditions and predict future outcomes. Take wine, for example. There’s a reason wine experts line up five or more glasses containing small amounts of similar wines. By comparing the look, smell, and taste of a specific varietal, side-by-side, the expert can determine which is the best in that instance. That’s context.

Of course, economics offers no such precision. Every economic issue involves a myriad of conflicting variables, many of which are unknown or unknowable.  Precise answers are elusive. However, some economic disruptions are so significant—so potentially divergent—that they provide a useful reference point.

 

Uncertainty is an undesirable economic condition.

 

To paraphrase Milton Friedman, “Inflation is always and everywhere a monetary phenomenon.” Similarly, I would say that ‘uncertainty is always and everywhere an economic problem.’  Markets dislike uncertainty. Investors detest unpredictability. Businesses struggle when the rules of the game keep changing.  And when uncertainty becomes excessive or protracted, the consumer stops spending.

That’s where The Steak House Index comes in—to add a degree of predictability to an otherwise chaotic future. Economic events barrel toward us like a bullet train; hopefully, our analysis can help us step safely off the tracks. And one of the best tools for doing that? Context.

Which brings us to today’s question:

Is today’s economic uncertainty worse than what we experienced during COVID?

The current administration’s rapid-fire flip-flopping on tariff policy has injected serious uncertainty and instability into the economy. It has left businesses scrambling to assess and adjust supply chains, reassess profitability, and recalibrate risk of loss. But does this uncertainty rise to the level of the economic chaos unleashed by COVID?  There we can find context.

COVID was not just a health crisis; it was an unprecedented economic cataclysm.

In early 2020, whispers of a virus in Wuhan turned into a roar.  By March, global travel ceased, vast sections of the U.S. and global economies shut down, and businesses ground to a halt. 

Within weeks, global supply chains weren’t just strained — they were severed. Factories in China, shipping networks in Europe, and warehouses in the US all fell silent. The modern, interconnected economy, designed for efficiency but not resilience, was suddenly exposed. 

The numbers were staggering:

 

• >< GDP shrank by 31.4% in Q2 2020—the sharpest decline in history.

• >< The stock market plunged 34% in just 23 days.

• >< 22 million jobs were lost in two months—wiping out a decade of job gains.

• >< More than one-third of small businesses permanently closed.

• >< Global trade fell off a cliff, with container shipping volumes down 30%.

 

For corporate America, the uncertainty was existential. Public companies issue “guidance” to help investors anticipate future earnings. When COVID hit, many S&P 500 companies did something almost unheard of: they suspended guidance altogether.

That’s how bad things got.   Covid destroyed the economy. 

And so did the Great Recession of 2008.   Again, we can find context there.

Unlike COVID, which hit like a tsunami, the 2008 Great Recession was a slow-burning disaster. It began as a housing bubble, morphed into a financial crisis, and spread into a full-scale economic collapse.

At its core was the subprime mortgage crisis, which led to:

 

• –  The collapse of Lehman Brothers (September 2008), triggering panic in financial markets.

• –  A $700 billion bailout (TARP) to prevent the banking system from imploding.

• –  A credit freeze that choked off lending to businesses and consumers alike.

 

The consumer impact was devastating:

 

• –  7 million jobs were lost, but over a longer period (2007-2010) rather than in a sudden collapse like COVID.

• –  Home values plummeted by 30%, wiping out trillions in household wealth.

• –  Consumer confidence plunged to 37.7 in February 2009 — the lowest level ever recorded at that time.

• –  GDP shrank by 8.4% in Q4 2008, marking one of the deepest contractions since the Great Depression.

• –  Household spending collapsed, with retail sales dropping by 12.7% in late 2008.

 

Even after the technical recession ended in June 2009, the damage persisted:

 

• –  Unemployment remained above 9% for 30 straight months (2009-2011).

• –  Economic growth averaged just 2.2% from 2010 to 2019, compared to 3-4% in prior recoveries.

• –  Wage growth was stagnant for nearly a decade.

• –  Housing and financial markets took years to recover.

 

This was an economic event that changed consumer behaviors permanently — people became more risk-averse, debt-averse, and savings-conscious, causing the subsequent economic expansion to be sluggish and unsteady for years.

Now, let’s fast-forward to today.  At the beginning of 2025, our US economy was growing at a robust rate.  But in the past month or so, a new source of uncertainty has emerged: tariff policy whiplash.

The current administration has swung between easing tariffs, reinstating them, and threatening new ones—all within days or weeks. This unpredictability has left businesses scrambling.

Consider the impacts.  Companies dependent on Chinese imports (automotive, electronics, retail) are unsure whether they should shift supply chains or brace for new tariffs.  Or shutter factories.  U.S. exporters — especially in agriculture and manufacturing — face retaliatory tariffs and shifting trade deals.  The stock market has become hypersensitive to tariff announcements, with volatility spiking whenever new trade policies are announced.  Finally, the consumer’s perception of future inflation levels is exacerbated by higher import cost fears.

Depending on which survey you read, consumer confidence is holding somewhat steady (hovering around 104 in early 2024) but remains fragile. If tariff instability and business uncertainty worsens, it could erode consumer spending, slow GDP growth, and dampen business investment—echoing elements of the Great Recession’s long, sluggish recovery.

So, are today’s economic conditions worse than COVID or the 2008 Great Recession?

 

The short answer is no.

 

This is bad … but not as bad as Covid or the Great Recession.   Covid was an unexpected, instantaneous economic earthquake — a sudden, unprecedented halt to global commerce.  The Great Recession was a slow-burning, systemic collapse that fundamentally changed financial and consumer behavior for years.

The current tariff-driven uncertainty, while damaging, is more contained. For now, at least.  Duration is important here, as the pain will grow over time.  However, that doesn’t mean tariff uncertainty is trivial. It’s already dampening investment, delaying hiring, and rattling markets. If left unchecked, it could stifle economic growth, just in a slower, more insidious way — more akin to the Great Recession’s lingering drag than COVID’s immediate shock.

Economic uncertainty comes in many forms. Some events — like COVID — are tsunamis. Others — like the Great Recession — are slow-moving economic depressants. Some, like tariff policy whiplash, chip away at confidence, creating an environment where businesses hesitate, consumers pull back, and growth slows.

While today’s tariff-driven uncertainty may not be as devastating as COVID or as transformational as the Great Recession, it’s still a serious threat. Businesses need clarity, consistency, and stability — not policy roulette.

Because as we’ve learned, uncertainty — no matter the source — is the enemy of prosperity.  Let’s head over to the steakhouses.

 

 

Well, not much has changed here.   Reservation demand seems fairly consistent so far.   Here’s the longer-term chart:

 

 

“The only thing we have to fear is fear itself,” FDR said during his first inaugural address way back in 1933.    He talked about the “nameless, unreasoning, and unjustified terror” gripping the nation in the years following the Crash of ’29 and the Great Depression. 

Fear is corrosive.   It was then … and it is now.   Hopefully all this fear an anxiety will soon be just a memory; but if not, we will all pay the price the longer it lingers. 

<>  Terry Liebman