By PYMNTS Posted on March 31, 2020
New Goldman Sachs projections on how the coronavirus pandemic will play out in the U.S. say unemployment will hit 15 percent — but there will be a strong and swift recovery near the end of the year.
According to the bank’s predictions, as reported by CNBC, gross domestic product (GDP) will sink 9 percent during the first quarter and then fall even further with 34 percent in the second quarter. That drop would be the biggest free-fall since World War II ended. The numbers now predicted are much higher than Goldman Sachs’ original estimate of 9 percent for unemployment and 6 percent and 24 percent respectively for GDP in the first two quarters.
But the bank said the economy will pick back up swiftly, with a 19 percent jump in the third quarter, making an arc from the nation’s worst numbers to its best. The main factors in a possible rebound, Goldman said, could come from the financial aid currently being brewed up in the halls of Congress, including a $2 trillion stimulus package just passed last week and more aid to follow later. In addition, the Federal Reserve’s programs to jumpstart the economy, including its move to take its interest rate to zero, and a possible measure coming later to support state governments could also buoy matters.
The social distancing measures currently being enforced should lead to lower numbers of infected people, and increased testing will help to start things slowly back up by May or June, Goldman Sachs analysts said. Auto industry output would see a dramatic decline, but the food and beverage industry would see an increase in spending, they said.
For now, though, unemployment is through the roof with over 3 million cases filed last week and over 5 million more expected in the next count of them this coming Thursday, April 2. Goldman Sachs said that means things will be worse than it had originally forecast in the near term and could also mean other side effects later. But the firm was confident in the easing of monetary and fiscal policy to offset some of those effects.
The coronavirus pandemic has swept across the entire world with debilitating economic effects, with businesses forced to close, people losing jobs and industries brought to heel by the drastic bottoming-out of revenues.