The economy is losing its way as coronavirus cases continue spreading throughout the US with Congress delaying the COVID-19 relief package for helping millions of business owners and American workers to withstand this storm. That is creating concerns regarding an economic growth potential contraction next year. This will be the foremost “double-dip” of recession for the country since the early 1980s.
Feroli On Recession
Michael Feroli, top economist, JPMorgan Chase told clients about how the coronavirus surge with renewed restrictions for containing the spread would accelerate layoffs and contract economic activity by $50 billion for the first quarter of 2021. That is translating into an annual drop in GDP-the value of services and products- by at least 1%. It would also block an ongoing recovery of the economy from lockdowns which rebounded rapidly from July to September with the reopening of businesses which is now appearing to slow down.
If the coronavirus weighs on economic activity, leading to temporary business closures or otherwise, the related layoffs will show up. The comeback of COVID-19 is already weighing on sentiment(consumer) and the coronavirus could have more negative effects, according to Feroli in his report.
Other Opinions On “Double Dip”
The US’s largest bank, JPMorgan Chase is not the only one to warn about the recession. In past weeks, Moody’s and S&P Global’s forecasting arms have both warned about this.
Mark Zandi, Moody’s Analytics, Chief Economist told CBS that the economy is expected to slow down at a 1.5% annual rate. This is equal to a drop of $25 billion in the country’s income/month for the first quarter of next year.
Despite these concerns, other economists believe that the country won’t slip into the recession. The Industrial Average of Dow jONES TOPPED 30,000 on Tuesday for the first time.
According to Street Journal’s recent survey, the economy is forecasted to grow at a 3.3% rate starting next year. But it’s unclear whether these estimates build on the prediction that Congress will bring through a stimulus bill within this year to support businesses and struggling workers.
Despite the expectations of Wall Street, both Democrats and Republicans did not strike a bargain regarding the amount to be included in the stimulus. Many people think that more stimulus is not possible until Biden takes over on January 20.
The Govt. reported on Wednesday that the number of people claiming jobless aid which was falling recently has been accelerating for the 2nd week consecutively. Consumer spending for October was weaker than predicted. Things will be worse as COVID-19 cases grow with running out of unemployment benefits.
The data hints at a higher consumer spending loss than has been anticipated and this was before the surge in COVID-19 cases in early November, according to Feroli.
Michelle Meyer, U.S. economist, American bank on Tuesday forecasted a good start for the coming year. Meyer commented to the journalists in the annual outlook of the bank.
Ethan Harris, Global economist, BofA wrote that we are in the starting phase of the coronavirus curve and a few weeks will be required to minimize the damage to the economy and public health.