U.S. economy is now in recession, UCLA Anderson Forecast says
Forget predictions that the U.S. economy will enter a recession this year due to the coronavirus pandemic — the UCLA Anderson Forecast says it has happened already.
On Monday, the school revised a forecast it issued just last week that stopped short of predicting a recession. The revised version says the economy has already stopped growing and will remain in recession through the end of September.
This is the first time in the 68-year history of the forecast that it has been updated before its planned quarterly update.
Economists at the UCLA Anderson School of Management — the university’s graduate business school — said they revised the forecast after incorporating a review of how the 1957–58 H2N2 influenza pandemic affected the U.S. economy.
The year started solidly, but the forecast predicted that rapid effects on the economy from the virus would slow first-quarter economic growth to a rate of 0.4% and that the economy would shrink at a 6.5% rate in the second quarter and a 1.9% rate in the third quarter.
Assuming the pandemic ends this summer and supply chains are restored, the forecast predicts the resumption of normal economic activity and an economic growth rate of 4% in the fourth quarter.
Because California has a higher proportion of its economic activity linked to tourism and trans-Pacific transportation, the forecast predicts that the recession will be slightly more severe in the state.
California is expected to shed more than 280,000 of its payroll jobs, with leisure, hospitality and transportation sector jobs accounting for more than one-third of those. That would drive up the unemployment rate to 6.3% by the end of this year, with effects continuing into 2021, when the unemployment rate is expected to average 6.6%.
In the forecast released last week, UCLA economists tried to take into consideration the economic fallout from the coronavirus outbreak. That forecast had still expected U.S. GDP to grow modestly in the second and third quarters.
It said then its predictions were based on the midpoint between the coronavirus having a very minimal effect and, on the other end, the virus causing a recession. It also said the strength of the California economy would help buffer the state from short-term interruptions in supply chains and travel.
Since then, the disruptions to the economy have jumped.
White House economic advisor Kevin Hassett says unemployment rate will approach Great Depression
Published Sun, Apr 26 2020 11:27 AM EDT
Updated Moments Ago
KEY POINTS
Speaking to reporters on the White House lawn on Sunday morning, Hassett said the unemployment rate could hit 16% and "the next couple of months are going to be terrible" for economic data.
Hassett described the coronavirus shutdown as "the biggest negative shock that our economy I think has ever seen."
"You're going to see numbers as bad as we've ever seen," Hassett said.
The insured unemployment rate, which compares those current receiving benefits to the size of the labor force, rose to 11% this past week, a weekly jump of 2.8%. That translates to "a barely believable" 23% when the Labor Department releases its unemployment rate calculation in two weeks, according to Paul Ashworth, chief U.S. economist at Capital Economics. The previous high for the U.S. was 24.9% during the Great Depression.
"You're going to see numbers as bad as we've ever seen," Hassett said. "GDP growth in second quarter is going to be negative. Wall Street estimates are negative 20%, 30%. We've done something unprecedented, stopped everything, output [has] gone to zero."
Record-Long U.S. Expansion to See Its End in First-Quarter GDP
.. Report forecast to show economy shrank at 3.8% annualized rate .. Economy has suffered ‘huge adverse blow,’ panel head says
Less than a year ago, the U.S. economic expansion was celebrated as the longest on record. This week its end will become all but official.
Commerce Department figures due Wednesday are projected to show gross domestic product shrank at a 3.8% annualized rate from January through March amid the Covid-19 pandemic and government-mandated lockdowns aimed at preventing its spread. Such a decline would be the steepest since just before the last recession ended in 2009.
And it pales against expectations for the second quarter, with the worst estimate for a previously unimaginable 65% pace of contraction, by far a record in data back to the 1940s. The main economic questions now revolve around the duration of the slowdown and the shape of the recovery as governments gradually lift restrictions on businesses and schools.
Nonetheless, the U.S. figures will go down in history as marking the beginning of the recession -- or the peak of the business cycle, in the argot of economists. While a panel of academic arbiters will officially decide the downturn’s start date in a few months, the GDP figures will underscore what’s already clear from government data that show tens of millions of job losses along with plunges in consumer spending and factory output.
Just imagine a country that was boasting about the economy's strength, job growth and stock market highs just a few weeks ago has suffered record filings for unemployment in the span of only a few weeks?
shogun wrote:Just imagine a country that was boasting about the economy's strength, job growth and stock market highs just a few weeks ago has suffered record filings for unemployment in the span of only a few weeks?
True, but they weren't the only one. All world economies have crashed due to reduced demand (effects of quarantine), fear of the virus and diversion of funds from other employment creation schemes into health care.
We are hit triple hard by this because: 1. Fearful Trinis will reduce going out and spending. 2. The government has chosen the path or strict mitigation instead of being smart, so expect a year of restrictions. 3. Oil and gas prices are not rising up anytime soon.
What to expect?
Mass layoffs in the private sector, layoffs in state companies (really hoping WASA and T&TEC trim the fat).
Many businesses will be closing down, especially restaurants and gyms. Tobago will be severely impacted as well.
World Economic Outlook, April 2020 -- Chapter 1: The Great Lockdown
April 6, 2020
The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis.
In a baseline scenario--which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.
Coronavirus: Stock markets boosted by remdesivir drug hopes
30 April 2020
Business
Shares in the US and Asia have risen on hopes that an experimental drug could help treat symptoms of Covid-19.
A leading US infectious disease expert said that early results of a clinical trial on anti-viral treatment remdesivir were "quite good news".
Investors are betting the drug could help countries emerge from lockdowns aimed at curbing the outbreak.
Gilead Sciences, which is developing the drug, saw its shares rise by more than 5.5% New York trading.
Markets had already begun to rise after Gilead said preliminary indications from a remdesivir trial showed that it helped patients recover more quickly.
A potential medical breakthrough like this is seen as a key step towards governments being able to ease the tight restrictions they have imposed on the movement of people as they try to slow the spread of the infection.
Just as US money market returns have started to increase this happens. I remember when I first opened a US$ account at UTC the monthly returns were generally 5.5% thereabouts. Post 2008 it fell and fell till it reached to less than 1% but it finally started to rebound within the last year or so. Actually got my statement for the last quarter of 2019 last week and it averaged between 1-1.5%.
*Recession of 30 to 90 days Government’s Self induced coma on the economy*
By Luis H. Guío Suárez (PhD)
We are living or are going to be in a period of economic decline during which trade and industrial activity has been reduced, which will last at least 30 to 90 days in the best of scenarios.
The curious characteristic is that, it was not consumer skepticism what lowered demand, but it was that for which governments opted; to close the economy down, confining consumers.
The reason why they did that is because they were unprepared for an outbreak. Masking their unreadiness with stern measures of power, as if two wrongs may make a right.
Confining the sick is the right measure for an outbreak. That requires knowing where the sick are. Finding that out is hard work for anyone. Tracking the sick and their contacts is also even more hard work.
The lazy-man’s solution is to confine everyone, sick and healthy alike, which depending on the period of confinement kills demand, which in turn starts a recession.
The key lapse is 60 days. That is because most people and certainly the lion’s share of companies are 60 days poor: meaning that, if they receive no income in 60 days they would be dead broke. That is how Stanley & Danko want us to see it. Others see it as cash flow stricken, but that is a euphemism.
In plain language cash is king: in any financial crisis and in any natural disaster [as the storms in Puerto Rico (September 19th - 21st/2017) showed]. Here cash need not be understood as bills or notes. There is room for gold coins or silver coins, too. Those who have cash generate demand. And, demand is better generated when many people have a little cash to spend than, when few persons have tons of cash to spend.
Recessions start when many people, i.e. buyers, have no cash to generate demand.
Recessions should be seen as wealth redistribution sessions towards more unfairness, as Pfeffer, Danziger & Schoeni present them.
They start by a distortion generated by those who control the system or play therein, that needs to be corrected. It may be corrected by the government’s oversight agencies, when they intervene, or by the market, when it crashes.
The correction sought was not having enough biological test to find out where the virus positives were located, to confine them, and them only.
The action taken was halting demand, by confining everyone.
In redistributing wealth, the government who halted demand must revive it.
How do they plan to do that?
By giving cash to the ones who have the most money, i.e. large companies? or By giving cash to common people so that they may consume and thus kick start demand?
So, companies hire people but they do not necessarily create jobs.
Customers create jobs. Companies are vehicles to service customer needs. In servicing such needs they hire people to turn a profit, but if there are no customers there is nothing: no companies; no jobs. Just poverty.
Sounds childish? Too basic? Then, why rescue companies instead of rescuing consumers?
It is just a matter of what the policy is in effect when redistributing wealth. In recessions, people who have cash in hand get richer. That is a redistribution at its best; unfair as it may seem.
The government has to pump money into the economy: but where?
Imagine a tree. You have to spend money to harvest; yes. But, you must water, fertilize and wait before reaping. Harvesting seems to be very productive. Picking low hanging fruit seems yielding, alright, but it is a mirage. If you overlooking planting what is the future of harvesting.
Following that trend of thought, where would you place the government’s money. Where is it most conducive to fair distribution of wealth?
In understanding such premises keep in mind that
You are a customer. “We are all consumers”, as Colombia’s Superintendence of Industry and trade claims
Having cash in hand is important.
Choose your disbursements and try for them not to be periodic or automatic — ever.
Preserve your way of life, because in servicing and supplying that way of life demand and jobs are created.
Ask from your authorities to concentrate their aid efforts in reducing disparity instead of increasing it.
History is on the side of increasing disparities but it does not have to be that way this time.
US unemployment surges to a Depression-era level of 14.7%
By CHRISTOPHER RUGABER
today
WASHINGTON (AP) — The coronavirus crisis has sent U.S. unemployment surging to 14.7%, a level last seen when the country was in the throes of the Depression and President Franklin D. Roosevelt was assuring Americans that the only thing to fear was fear itself.
And because of government errors and the particular way the Labor Department measures the job market, the true picture is even worse. By some calculations, the unemployment rate stands at 23.6%, not far from the Depression peak of nearly 25%.
The Labor Department said Friday that 20.5 million jobs vanished in April in the worst monthly loss on record, triggered by coast-to-coast shutdowns of factories, stores, offices and other businesses.
The breathtaking collapse is certain to intensify the push-pull across the U.S. over how and when to ease stay-at-home restrictions. And it robs President Donald Trump of the ability to point to a strong economy as he runs for reelection.
“The jobs report from hell is here,” said Sal Guatieri, senior economist at BMO Capital Markets, “one never seen before and unlikely to be seen again barring another pandemic or meteor hitting the Earth.”
The U.S. entered a recession in February, according to the official economic arbiter
The worst U.S. downturn since the Great Depression is now officially a recession, according to the National Bureau of Economic Research.
Though it seemed a foregone conclusion, the NBER, the official arbiter of recessions, made the declaration Monday as the nation tries to recover from the coronavirus pandemic.
In making the declaration, the committee determined that a “clear peak in monthly economic activity” occurred in February. The peak in quarterly activity happened in the fourth quarter of 2019.
The recession brings to an end the longest expansion in U.S. history, which the NBER dated as lasting 128 months, or nearly 11 years. That growth seemed poised to continue until the declaration of the coronavirus as a pandemic, a move that triggered 95% of the U.S. economy being put into shutdown and sent the unemployment rate, which had been at a 50-year low, soaring to 14.7%, its worst in post-World War II history.
However, most economists think contraction will end in the second quarter, putting an end to the recession as well. Goldman Sachs chief economist Jan Hatzius said that while this is “almost certainly the deepest recession since” the war, “it is almost certainly also the shortest recession.”
US Q2 GDP fell record 33% in amid coronavirus recession, lockdowns - Business Insider
Ina Fassbender/AFP/Getty Images
It's official: The coronavirus pandemic has led to the worst GDP slump in American history.
US gross domestic product fell at an annualized rate of 33% in the second quarter, the Commerce Department said on Thursday. It's the largest fall on record dating back to the 1940s. Economists had expected a roughly 35% annualized drop, according to Bloomberg data.
The historic drop in output reflected the worst months of pandemic-related shutdowns to control the spread of COVID-19 and followed a 4.8% contraction in the first quarter that ended the longest expansion in US history.
In April, much of the country was operating under strict stay-at-home orders that brought much activity to a halt. While activity picked up again in May and June as states started to reopen, it wasn't enough to undo the damage of the lockdowns.
"The decline in second quarter GDP reflected the response to COVID-19, as 'stay-at-home' orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses," the Bureau of Economic Analysis report said.
The US is now grappling with spikes in COVID-19 cases that have threatened to derail the economic recovery from the pandemic recession. Many states have had to pause or roll back reopening plans to deal with new coronavirus cases, weighing on economic activity. Unemployment remains high, and consumer sentiment has slumped.
While stark, the historic GDP figures may appear worse than they are, because they are reported as an annualized rate. The forecast GDP drop of 35% on an annualized basis actually means the economy was about 10% smaller in the second quarter than in the first months of the year.
Still, the economy shrinking by 10% in one quarter is also a record slump. And Thursday's figure is the first of three estimates, meaning it could be revised to reflect an even sharper contraction.
Economists expect that economic activity has picked up as states have reopened; those surveyed by Bloomberg expect that the economy will grow at an 18% annualized rate in the third quarter. Even though that would be a record positive jump, it would still leave GDP far below pre-pandemic levels.
