Goldman Sachs: US Unemployment To Hit 15 Pct; GDP May Drop 34 Pct In Quarter

Goldman Sachs predicts the downturn will be 4x worse than 2008, but recovery will be swift

Goldman Sachs‘ new prediction is that the economic fallout from the coronavirus pandemic will end up four times worse than the recession from 2008-09, but the recovery will be swift, according to a CNBC report.

The bank said that the unemployment rate is likely to hit its highest rate since World War II ended with 15 percent, which could even be an understatement, as many people won’t be looking for jobs while everything is shut down.

Goldman said the second quarter would likely see an 11 percent drop compared to last year. There will probably be a 34 percent drop on a quarterly basis, according to Goldman.

All of these numbers are notably more dire than the height of the 2008 financial crisis, the bank pointed out. The stock market has been recovering from the early shock of the pandemic, however.

Goldman Chief Economist Jan Hatzius noted that the various social distancing and lockdown measures seem to be flattening the curve of the virus as of late, with even New York City seeing its numbers of hospitalizations falling slightly. Hatzius said projections of the overall fatalities and damage had not been as high in recent days.

There have been varying opinions on the end outcome of the pandemic for the U.S., with St. Louis Federal Reserve President James Bullard saying he doesn’t see the markets as terribly damaged in the long run, and Minneapolis Federal Reserve President Neel Kashkari contradicting that, saying a quick recovery was unlikely.

Hatzius said “business as usual” likely wouldn’t be in the cards until a vaccine was on the market. But he said slow and gradual re-openings could happen over time. For example, he said manufacturing could come back if precautions were taken to ensure infections don’t spike again.