Reuters
U.S. President Trump leads daily coronavirus response briefing at the White House in Washington.
- A new CBO report said the economy would shrink by 7% in GDP and unemployment would surge to 10% in the second quarter, a level unseen since the Great Recession.
- Lingering effects of the crisis could stretch into the end of 2021 as unemployment could still be as high as 9%.
- The analysis collides with President Trump's optimistic assessment of the economic crisis, as the CBO is not expecting a quick rebound this year and is projecting the pain will stretch on for a long time instead.
- "I don't think it's going to end up being such a rough patch," Trump said at a White House press conference last week.
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The Congressional Budget Office said in a report released on Thursday that it expects the economy to shrink substantially this year, followed by a surge in unemployment to a level unseen since the Great Recession, as a result of the coronavirus pandemic.
The nonpartisan agency projected that gross domestic product would fall by 7% in the second quarter, with a drop in the annualized rate of at least 28%.
The CBO expected unemployment to spike to 10% in the second quarter. And it said lingering effects of the massive job losses and business closures from the pandemic could lead to an unemployment rate of 9% at the end of 2021.
Still, the CBO emphasized that its projections were preliminary and could change given the fast-evolving nature of the public health crisis.
"Social-distancing measures could be in place for a shorter, longer, or much longer time ... with major consequences for the economy and the nation," the agency said.
For now though, the CBO isn't expecting a sharp rebound of the American economy. The forecast sharply collides with President Trump's optimistic assessment of the crisis, which has led to mass business closures to curb the spread of the coronavirus around the country.
"I don't think it's going to end up being such a rough patch," Trump said at a White House press conference last week. He reckoned the economy would "open up like a rocket ship" once the pandemic subsided.
Economists say the unprecedented economic shutdown could inflict more damage than the recession over a decade ago. At that period's worst, unemployment fell as low as 10% during the month of October 2008.
The new CBO report came shortly after the Labor Department released data showed 6.6 million people filed for unemployment in the week ending March 28, setting a record for the second week in a row. Around 3.3 million people filed for unemployment only the previous week, shattering a record set in an economic downturn early in the Reagan presidency.
On Friday, the Bureau of Labor Statistics released data showing the economy shed 701,000 jobs in March. The unemployment rate spiked to 4.4% from 3.5% in February, a historic low.
Still, some prominent economists like Nobel laureate Paul Krugman say unemployment could reach 20% by the end of April.
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