The new projection shows the long-term impact that economists say the pandemic will have on the U.S. economy, the largest in the world. A severe disruption to production and hiring in March and April has had a jarring impact on the United States.
The country’s economic outlook over the coming decade has “deteriorated significantly” since the CBO published its full baseline economic projections in January, the agency said. The agency Thursday also said that economic growth for the second half of 2020 is now expected to be slower than projections published in May, which focused on the U.S. economy this year and next.
But there is plenty that’s still unknown. Thursday’s projections were “subject to an unusually high degree of uncertainty,” the report said, including “incomplete knowledge about how the pandemic will unfold [and] how effective monetary and fiscal policy will be.”
The projections are also based on laws already passed by Congress to extend relief to households, businesses and local governments — but do not account for any future stimulus measures. Lawmakers are currently debating how or whether to extend government aid this summer, including to industries hardest-hit by stay-at-home measures.
The latest projections showed that real gross domestic product is expected to grow at a 12.4 percent annual rate in the second half of 2020 and recover to pre-pandemic levels by mid-2022. The unemployment rate is expected to peak at over 14 percent in the third quarter of this year, the report said.
The 10-year economic forecast is being released now, ahead of the CBO’s budget projections later this summer, so Congress can take into account “a rapidly evolving environment,” according to the report.
In May, the CBO estimated that real GDP would contract by 11 percent in the second quarter of this year, equivalent to a 38 percent drop at an annual rate. The May report also projected that in the second quarter, almost 26 million fewer Americans would be employed than in the fourth quarter of 2019.
At a news conference following Thursday morning’s jobs report, President Trump said the economy was “coming back extremely strong.” Earlier this week, senior White House economist Larry Kudlow said that the “overwhelming” evidence pointed to a V-shaped recovery.
But many economists and lawmakers caution that the jobs data reflects a survey taken in the middle of June — before a surge in cases pushed multiple states to reimpose restrictions and scale back reopening plans. That means scores of Americans have now been kicked out of the workforce for a second time. This week also marked the 15th straight week of unemployment claims that topped 1 million.
On Wednesday, the country reported 52,789 new coronavirus cases, marking the largest single-day total since the start of the pandemic. A growing number of health officials, lawmakers and economists say controlling the virus is crucial for the economic recovery. Minutes released Wednesday from the Federal Reserve’s June meeting showed that officials at the central bank are concerned that the United States could enter a much worse recession later this year if infections continue to mount.
“The severity and duration of the pandemic will be affected by how various mitigation measures reduce the spread of the virus and by when vaccines and additional treatments become available,” the report said. “Further uncertainty surrounds the effects of the pandemic and social distancing on economic activity and on the pace of economic recovery."