Outlook on U.S. Economy

The U.S. economy is facing a significant economic recession likely one that is truly unique and not like other recessions we have ever seen before. There is little doubt that we are already in a recession because of the coronavirus pandemic, with many businesses shut down, and many Americans are staying home. It is difficult to say when the bottom will occur and how long it will take to climb bank. However, I have gathered a few data points, summarized below to help give you a guide on how many are seeing the outlook for the U.S. economy.

The US gross domestic product (GDP) declined 4.9%, the first time there was a decline in a very long time. Also the personal consumption expenditures (PCE) declined 7.6%. Many Wall Street banks are offering even more pessimistic outlook for the rest of the year. Morgan Stanley estimates 2nd quarter GDP will decline 38% and they expect the U.S. economic recovery to be more drawn-out than previously anticipated, marked by a deeper drop into a recession and slower to climb out of it. By Q3, Morgan Stanley estimates growth of 21%, but that will only recover 35% of the lost output in the first half of the year. Morgan Stanley isn’t the only one offering a bleak forecast. The Congressional Budget Office stated the economy will contract by at least 28% in Q2 and that those declines could be significantly larger^.

One investment firm doesn’t believe there will be a V-shaped recovery, while many are originally predicting. They mentioned the GDP could sink to levels last seen since 2014 and will remain flat for years to come as the coronavirus induces lasting damage. Also widespread joblessness will cause a lasting strain for the economy to rebound. Some have estimated the unemployment rate at 20% and a few have predicted it to get as high as 30%. If those figures are correct, the unemployment rate will be between three and five times higher than that of the last financial crisis. When hiring resumes, consumer spending is unlikely to stage such a quick comeback as many Americans have limited savings before the pandemic hit.

The government has tried to do as much as it can, but many are predicting it is not enough to save the economy from a recession. It is possible the government steps up for more in the coming months, but many are unsure how much more the government can provide.

As I am an optimist, I hope these predictions are wrong and the economy sees a V-shaped recovery. I hope we find a solution to the coronavirus and everyone can get back to work and their normal lives.