JPMorgan economists have revised their earlier forecast that the U.S. GDP would fall 25% in the second quarter, now estimating a 40% drop — and a 20% unemployment rate, CNBC reported last week.
The economists expect that 25 million workers will have lost their jobs by the end of the second quarter because of non-essential business closures intended to limit the spread of the coronavirus, according to CNBC. At least 16.8 million people have already filed for unemployment in the past three weeks after shutdowns began around March 15, the outlet reported.
The 40% drop in the economy is due to a decrease in the expected number of hours worked during the second quarter, the economists said.
The forecast did have some good news for the third and fourth quarters, however, with predicted 23% and 13% respective increases based on expected ends to shutdowns by June at the latest, CNBC said.
Crunching the numbers
CNBC reported that a number of other firms have also revised their forecasts, but most of them remain in the 30% range on decrease in GDP.
Either way, CNBC made clear that there is no historical precedent for the expected decreases. Even the Great Depression did not shut down the economy the way the COVID-19 pandemic has.
Congress and President Donald Trump have signed a $2.2 trillion aid package to help those who have been unable to work during shutdowns — both individuals and businesses — but it is still unclear whether that aid will be able to keep businesses afloat through six weeks of shutdowns that could turn in to even more.
Trump and his coronavirus task force still have not decided when the economy will re-open, but the estimated death toll from the disease has been revised downward, and new hospitalizations have begun to decline in numerous parts of the country, according to reports.
Re-opening the economy
Trump has said he wants to re-open the economy “very soon,” but has not yet set a date for when that can be expected to happen.
He said earlier in the week that he plans to appoint a second task force to study how and when to re-open the economy in a safe way, CNBC reported.
Other voices in his administration have also begun to talk about the importance of re-opening the economy. Treasury Secretary Steve Mnuchin and White House economic adviser Larry Kudlow have both said they think the economy can re-open in May, according to Reuters.
“When the spread of the virus is under control, businesses will re-open, and people will come back to work,” Federal Reserve Chairman Jerome Powell said on Thursday, Reuters reported. “There is every reason to believe that the economic rebound, when it comes, can be robust.”