The Covid-19 epidemic and the ensuing foreclosure have stalled the economy, and even if states reopen slowly, it will be a difficult decade as the country recovers from this recession, according to the CBO.
On top of that, the forecast is riddled with uncertainties in terms of the virus itself, changes in consumer behavior and political responses, the CBO warned.
The CBO now predicts that the unemployment rate will remain above its pre-pandemic level – which was a nearly 50-year low of 3.5% – until after 2030, the end of the current forecast range, predicts the CBO. The 10-year average unemployment rate will be 6.1%, against 4.2% forecast in January.
Meanwhile, the United States’ real gross domestic product, the largest measure of the economy, will average 3.4% lower over the next decade than originally forecast in January. It will take until 2028 for GDP to grow again with long-term trend growth.
Interest rates are expected to remain low for the foreseeable future, according to the Federal Reserve and the CBO, to encourage economic activity.
But it remains to be seen whether the worst is already behind us. The CBO predicts that the unemployment rate will peak in the third quarter before falling rapidly during the rest of 2020 and throughout 2021.
Unemployment has so far peaked in April at a rate of 14.7%. More than 20 million jobs were lost this month. But since then, America has seen a record number of jobs resurface as the economy reopens.
The Bureau of Labor Statistics announced earlier Thursday that a record 4.8 million jobs were created in June, bringing the unemployment rate to 11.1%. However, the economy is still down 14.7 million jobs since February.
However, concerned about rising Covid-19 infection rates in parts of the country, some states are suspending their reopening. For laid-off workers, this means more time out of the workforce.