Goldman Sachs: US GDP to Plunge 34% in Q2; Unemployment to Peak at 15%
April 3, 2020
Economists at Goldman Sachs rewrote their already grim estimates for the coronavirus pandemic’s economic toll in the U.S., forecasting an even steeper downturn in the first half followed by a stronger recovery later in the year.
The investment bank now expects U.S. real GDP to decline 9% in the first quarter and 34% in the second quarter, in quarter-over-quarter annualized terms, compared with previous forecasts of 6.3% and 24% downturns, respectively.
The projected GDP plunge in the second quarter would more than triple the previous record low of a 10% slump, recorded in the first quarter of 1958.
The revised forecasts reflect the “anecdotal evidence and the sky-high jobless claims numbers” that indicate a bigger collapse in the labor market and economic output, Goldman Sachs said. “This not only means deeper negatives in the very near term but also raises the specter of more adverse second-round effects on income and spending a bit further down the road,” it said in a research note March 31.
Goldman Sachs expects the U.S. unemployment rate to hit 15% by mid-2020, higher than its prior estimate of a 9% jobless rate. The unemployment rate for February was 3.5%. After surging to a record 3.28 million in the week of March 15-21, jobless claims are seen to climb to about 5.5 million in the week of March 22-28 and stay “very elevated” at more than 2 million in the week of March 29-April 4, the investment bank said.
Goldman Sachs expects economic growth to rebound with a 19% expansion in the third quarter, up from a previous forecast of 12% growth. Fourth-quarter growth is forecast to hit 12%, for a full-year GDP decline of 6.2%.
Monetary and fiscal policy measures announced over the past weeks would contain the second-round effects of the coronavirus crisis and support future economic growth, resulting in the higher forecast for the third quarter, Goldman Sachs said.
“We expect manufacturing to recover somewhat more rapidly than services, as factories are likely to reopen more quickly than nonessential services firm,” said the banking giant, which expects a later “phase 4” stimulus package from the U.S. government.
Source: S&P Global Market Intelligence
