We now have the first GDP numbers for the first quarter of 2020, and it is down 4.8%.
When one considers the trend of 2% annualized, and the fact that the shutdowns, and hence the economic contraction, did not begin until March, it means that the month of March fell at something approaching a 60% annual rate.
Obviously, this won’t continue at this rate, but predictions are looking at a 30% contraction:
The longest economic expansion in US history officially came to an end on Wednesday when the commerce department announced the economy shrank 4.8% in the first three months of the year.
The economic slump, the steepest since the last recession in 2008, is just an early indicator of how severely the coronavirus pandemic has affected the US economy.
Much of the US economy shut down in March in an effort to contain the virus, triggering 26 million people to file for unemployment benefits and wiping out a decade of jobs gains, at the end of the first quarter. The next set of figures from the commerce department will more accurately reflect the true scale of its impact.
Kevin Hassett, senior economic adviser to the White House, has predicted gross domestic product (GDP) – the widest measure of the economy – could fall at an annualized rate of 30% in the next quarter. Goldman Sachs expects a 15% unemployment rate in the US by mid-year, up from 4.4% at present.
The fall is the sharpest quarterly decline in GDP since the end of 2008 when the economy contracted by an annualized rate of 8.4%. But on current forecasts the drop-off could soon rival the economic collapse of the Great Depression. In 1932 the US economy shrank 13% over the year.
When one considers that pending home sales fell 25% month over month in March, this is going to get a LOT uglier before things turn up.
Also, with an additional 28 million people out of work, and a strong recovery, say 500K growth in non farm payrolls a month, something that has happened in only 15 months over the past 60 years, it would still take over a year for complete recovery.