With millions now out of work, the recession that economists have been dreading could already be here.
New US jobless figures, revealed on Friday, show an increase in unemployment claims of more than 6 million. With 3 million already lodged last week, that brings the total to more than 10 million – a total that’s set to rise.
“It’s our view at the Dallas Fed that we’re going to get into unemployment in the low to mid-teens,” said Robert Kaplan, president of the Federal Reserve Bank of Dallas.
“I may not be a good judge of what the pace of getting there will be, but I feel pretty strongly we’re going to get to that. And so, if that’s the case, it means something like low to mid-teens percentage of 160 million workers are, for at least some period of time, going to be unemployed and sit on unemployment claims.”
Bank of America is predicting that the US will now experience three consecutive quarters of GDP contraction, with the economy shrinking 7 per cent in Q1 and 30 per cent in Q2.
“The US recession will be likely worse than the consensus is predicting,” BetaShares chief economist David Bassanese told Investor Daily.
“There is an expectation that once the US gets past the peak in new infections, everything can quickly return to normal. But even if the US does reach its peak infection numbers in a few weeks, restrictions will likely need to linger for a month or so longer. I also doubt the economy – and especially corporate earnings – can stage the ‘V-shaped’ recovery investors are counting on.”
And given that there isn’t yet a vaccine, a second wave of infections is possible as restrictions are lifted. But even without a second wave, global consumers aren’t likely to resume their normal spending habits.
“It is not just a US recession we need to worry about,” Mr Bassanese said.
“We’re talking about depression conditions at least for a month or so around the whole world.”
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