As lockdowns resume in many U.S. states from a surge in coronavirus cases, a poll suggests the economic recovery has slowed.
In a Reuters survey, economists warned any job recovery is on track to be reversed as the number of COVID-19 cases reached nearly 4 million in the U.S. last week, with reports of more than 2,600 new cases every hour, the highest rate in the world.
As a result, it’s unlikely that a rebound can be sustained as the U.S.economy tries to emerge from the worst losses since the Great Depression.
Conducted from July 13-22, the poll revealed the economy shrunk by nearly 34 percent year-over-year in the second quarter (Q2). While economists predicted it would rebound with a 17.8 percent growth in the third quarter (Q3) and rise another 6.5 percent from October through December, that’s weaker than the 18.5 percent and 8 percent respective growth predictions made a month ago, the survey said.
“The current situation presents two risks: Some states might need to shut down more consumer activity to get the virus under control, and the stall in the reopening process might cause longer-term damage to businesses and the labor market,” David Mericle, chief U.S. economist at Goldman Sachs, told Reuters.
When economists put a number to the worst case scenario for the world’s largest economy, the median response put it at a 40.4 percent contraction in Q2, zero growth in the Q3 and Q4, resulting in a 9 percent contraction in 2020 and no growth next year.
Compared to last month’s poll, it suggests weaker growth next year as predicted medians fell from for the first six months of 2021.
Nearly two-thirds of economists surveyed said it would take two or more years for the U.S. economy to reach its pre-COVID-19 levels, while others said it would occur in one to two years.
The survey was released as the $1 trillion Republican version of a 4.0 COVID-19 stimulus bill is expected to be on Capitol Hill Monday (July 27).
Nearly 60 percent of economists surveyed said the risk that the job recovery underway reverses by the end of this year was high or very high, while just 23 percent said the risk was low and only one economist said it was very low.
“It’s not certain such a second wave will occur, but if it does, we believe this could suppress economic activity and give us a negative fourth quarter,” Daniel Bachman, senior U.S. economist at Deloitte, told Reuters.