The Congressional Budget Office (CBO) is anticipating a grim second quarter this year as the economy sputters amid coronavirus-related layoffs and business closures, CBO director Phill Swagel said in a blog on Thursday (April 2).
Considering the disruption of daily business combined with a boost from the stimulus package, the CBO’s “very preliminary estimates” point to a drop in gross domestic product (GDP) exceeding 7 percent in Q2 2020.
“If that happened, the decline in the annualized growth rate reported by the Bureau of Economic Analysis would be about four times larger and would exceed 28 percent. Those declines could be much larger, however,” he said.
There were more than 3.3 million new unemployment claims reported on March 26. The Q2 unemployment rate “is expected to exceed 10 percent during the second quarter, in part reflecting the ... claims reported on March 26 and the 6.6 million new claims reported this morning [Thursday, April 2].”
The CBO indicated that new claims filed April 2 were 10 times higher than in any single week from 2007-09, during the financial crisis and recession.
“CBO’s economic projections, especially for later periods, are highly uncertain at this time. To estimate the costs of legislation that is especially sensitive to economic conditions, such as provisions affecting unemployment insurance benefits, CBO is taking into account as much economic information as possible,” the CBO director said in the post.
A preliminary cost estimate of H.R. 6201 — the Families First Coronavirus Response Act — is being released by the CBO this week. H.R. 6201 was computed based on a 12 percent Q2 unemployment rate.
The projections also considered social distancing compliance and “the possibility of later outbreaks of the virus.”
Restaurants are especially struggling from the financial woes that have come with the coronavirus. The latest edition of PYMNTS’ COVID-19 Brief series shows that the share of consumers dining at sit-down restaurants had declined 85.2 percent since the pandemic began, dropping 52.3 percent in 11 days.