Despite frenzied efforts and a stock market bounce, the U.S. economy appears set for disaster. Goldman Sachs predicts a contraction of 24% in the national GDP for the second quarter of 2020. The long-term impacts of the global coronavirus pandemic are still largely unknown. As entire service sectors shut down for weeks at a time, airlines and cruise companies are barely operational. This dire prediction does come with a silver lining – Goldman Sachs believes that the economy will spring back to the tune of 12% in the third quarter.
Formulated by economists working for the company, these predictions will help guide decisions in the coming months. However, they should not be taken as certainty – governmental and personal responses to the pandemic are still in severe flux. While some countries have responded proactively with lockdowns and travel bans, others have downplayed the effects. Some countries, like the U.K., have pivoted when confronted with the reality of the situation.
Other Economic Reports
In addition to the dire Goldman Sachs report, JPMorgan released their own report. Although it does not include the full expansion of the COVID-19 impact, it does show the beginning. Jobless claims increased substantially – 281,000 in the week prior to the report. They predicted some layoffs, but COVID-19 related job losses are spiking at an alarming rate. Newsweek believes the job losses could reach levels higher than those seen during the Great Depression.
Morgan Stanley’s report suggests that the U.S. GDP could decline at an annual rate of 30.1%. Each individual report is concerning, but the level of consensus should be ringing alarm bells throughout the country. While Congress nears a stimulus agreement, suggested solutions offer a temporary band-aid rather than long term solutions.
Comparisons to Prior Recessions
COVID-19’s impact differs significantly from prior recessions. In 2008, the economic downturn came as a result of irresponsible actions. While it proved damaging to the economy, the overall situation didn’t change. The workforce remained stable and in turn produced goods and services. Finally, the government stepped in to solve the economic crisis.
In contrast, the coronavirus severs a major section of the workforce. Fewer people are working, buying fewer goods and traveling substantially less. The government continues to pump money into a variety of “solutions,” all of which tackle the symptom rather than the disease. Until a stabilizing factor emerges in public health, the economy will continue to falter.
Article By: Adam Stone