Economists See U.S. Facing Worst-Ever Quarterly Contraction

Economists say the U.S. is entering a sharp recession, with some projecting gross domestic product is headed for its worst drop in quarterly records back to 1947.

Containing the outbreak has forced the world’s largest economy to a sudden stop, shuttering businesses that are in turn poised to cut millions of jobs. Gross domestic product estimates range widely, but most economists expect a severe second-quarter drop will be followed by a rebound in the second half of the year as the pandemic abates. Meanwhile, many see the 3.5% jobless rate — which in February matched a half-century low — doubling or tripling in coming months.

Estimates, of course, are evolving quickly as the deadly path of the outbreak shifts by the hour, and some can soon be overtaken by events. Here are some of the latest, with GDP expressed as the quarterly change, seasonally adjusted annual rate:

TD Securities (March 23)

  • GDP: -3% (Q1), -25% (Q2)
  • Q2 unemployment rate: 7.4%
  • “The crisis is producing a dramatic policy response — fiscal and monetary. Even so, a severe recession looks inevitable.”

Morgan Stanley (March 22)

  • GDP: -2.4% (Q1), -30.1% (Q2)
  • Q2 unemployment rate: 12.8%
  • “With disruptions to economic activity becoming greater, we now expect this contraction in economic activity to be even deeper.”

Bank of America (March 20)

  • GDP: +0.5% (Q1), -12% (Q2)
  • Q2 unemployment rate: 6%
  • “We are officially declaring that the economy has fallen into a recession…On a monthly basis, we assume the trough is in April with a very slow return to growth thereafter with the economy feeling somewhat more normal by July.”

Bloomberg Economics (March 20)

  • GDP: +0.5% (Q1), -9% (Q2)
  • Q2 unemployment rate: 6.5%
  • “The Covid-19 lockdown means a hard stop for the U.S. economy. The second quarter will bring a contraction rivaling the steepest in history, and surpassing the worst period of the financial crisis.”
  • Link to note: GDP Facing 9% Contraction, Rivaling Worst Ever

Citigroup (March 20)

  • GDP: -0.5% (Q1), -12% (Q2)
  • Q2 unemployment rate: 6.4% (Q2)
  • “Beneath the extreme Q2 slowdown/Q3 re-acceleration dynamics a moderate 2001-style recession to be playing out.”

Credit Suisse (March 20)

  • GDP: -1.5% (Q1), -12% (Q2)
  • Q2 unemployment rate: 8%
  • “Economic data in the near future will be not just bad, but unrecognizable.”

Goldman Sachs (March 20)

  • GDP: -6% (Q1), -24% (Q2)
  • Q2 unemployment rate: 6.6%
  • “We expect declines in services consumption, manufacturing activity, and building investment to lower the level of GDP in April by nearly 10%, a drag that we expect to fade only gradually in later months.”

UBS (March 20)

  • GDP: -2.1% (Q1), -9.5% (Q2)
  • Unemployment rate: 5.8% (Q2)
  • “Demand will fall further as businesses halt travel, restaurants, bars, and theaters are shuttered, and schools in 35 of the 50 states are closed. All of April will be as weak as the second half of March.”

NatWest Markets (March 19)

  • GDP: -0.3% (Q1), -8.5% (Q2)
  • Q2 unemployment rate: 5.6%
  • “We are skeptical that we will see a V-shaped rebound. Our assumption is that large disruptions will continue through much of the second quarter and that the restart in activity will be slower than many expect.”

    JPMorgan Chase (March 18)

    • GDP: -4% (Q1), -14% (Q2)
    • Q2 unemployment rate: 6.25%
    • “The fact that the unemployment rate ends the year substantially higher than the current level should make clear why it would not be accurate to describe this as a V-shaped recovery, even with a strong Q3: that strength is not nearly enough to undo the expected damage to the labor market.”

    Deutsche Bank (March 18)

    • GDP: +0.6% (Q1), -12.9% (Q2)
    • No Q2 unemployment rate estimate at this time
    • “This baseline view of a V-shaped recovery is based importantly on clear signs that economic activity in China is quickly returning to normal even as Q1 is drawing to a close.”

    Oxford Economics (March 17)

    • GDP: -0.5% (Q1), -11.9% (Q2)
    • Unemployment rate: 10% (Q2)
    • “The U.S. economy is in a recession. The coronavirus pandemic will lead to profound, pervasive, and persistent, but not permanent reductions in activity.”

          — With assistance by Vivien Lou Chen

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