WASHINGTON (AP) – The US economy has entered 2020 at the height of record expansion, expecting that its 11th year of growth will not be the last.
Then the economy stopped abruptly. And now it’s in free fall.
The government will offer a glimpse of the darkness of the picture and its worsening as the coronavirus pandemic inflicts ruinous damage on Wednesday. Commerce should estimate that gross domestic product, the widest measure of the economy, declined at an annual rate of 5% or more during the quarter from January to March.
It would be the largest quarterly decline in GDP since the Great Recession, which ended in 2009. And it would be the first quarterly contraction in six years.
And yet forecasters say it will only be the forerunner of a much darker GDP report for the April to June quarter to come, when business closings and layoffs hit with devastating force. The Congressional Budget Office has estimated that GDP will plunge into the current quarter at an annual rate of 40%. It would be, by a breathtaking margin, the darkest quarter since such records were first compiled in 1947.
Within weeks, businesses across the country shut down and laid off tens of millions of workers. Factories and stores are closed. Home sales are down. Households are cutting back on spending. Consumer confidence is weakening.
As the economy slips into what looks like a severe recession, some economists hope that a recovery will come quickly and robustly once the health crisis is resolved – what some people call a V-shaped recovery. , however, analysts say they believe it will be difficult for the economy to recover even after the virus epidemic ends.
Many Americans, they say, may be too scared to travel, shop in stores, or visit restaurants or movie theaters anywhere as much as before. In addition, local and state officials may continue to limit, for health reasons, the number of people who can congregate in such places at any given time, making it difficult for many businesses to survive. This is why some economists argue that the damage caused by the recession could persist much longer than some assume.
“The recession will be worse than the one we went through from 2007 to 2009,” said Sung Won Sohn, professor of economics and commerce at Loyola Marymount University in Los Angeles, referring to the downturn that has been called the Great Recession because it was the worst recession since the Great Depression of the 1930s.
There is also concern that the coronavirus will re-emerge after the economy reopens, forcing reopened businesses to close again.
“The virus has done a lot of damage to the economy, and there is so much uncertainty now,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi said he thought the economy could resume growth in the July-September quarter before weakening in the last quarter of 2020 and then recover on a firm basis in mid-2021 – assuming that a Coronavirus vaccine is ready for use by then.
“I would call this period of quicksand crossing until we get a vaccine,” said Zandi.
The Trump administration is more optimistic. President Donald Trump told reporters this week that he expects a “sharp increase” in GDP in the third quarter, followed by “an incredible fourth quarter, and you are going to have an incredible next year.”
The president bases his re-election campaign on the argument that he has built a strong economy in the past three years and can do so again after the health crisis is resolved.