CERF: US has entered deep recession

Economists predict slow and painful recovery

CERF economists Dan Hamilton and Matthew Fienup reported that the United States has entered a deep recession as a result of COVID-19 and the extraordinary policy responses intended to slow the disease.

Photo: Brian Stethem

The California Lutheran University Center for Economic Research and Forecasting released its 2020 First Quarter United States Economic Forecast on Tuesday, Apr. 14.

Highlights:

  • It is not too early to declare that we are experiencing a historic and life-changing event. The United States has entered a deep recession as a result of COVID-19 and the extraordinary policy responses intended to slow the disease.
  • Given uncertainty, the CERF team has developed a range of scenarios, including a baseline forecast and an optimistic scenario. The primary driver of the scenarios is the duration of social distancing and shelter-in-place orders.
  • CERF’s baseline forecast anticipates, from peak to trough, a 20 percent decline in U.S. GDP. The implied quarter-on-quarter annualized growth rate is staggering: negative 50 percent in Q2. Plainly, there is no economic contraction in the post-World War II era that compares to the current crisis.
  • We anticipate average monthly losses of 9 million jobs during the second quarter of 2020. Job losses under this scenario dwarf anything experienced since the Great Depression.
  • CERF economists are among the 45 percent in a recent Wall Street Journal survey who are predicting a “U-shaped” recovery, with a prolonged trough and a slow and painful economic recovery.
  • CERF concludes that government can do little to reduce the severity of the Coronavirus Recession. The $2 trillion stimulus package is likely to fail because monetary policymakers bound their hands before the crisis began and because fiscal policy priorities stand in direct opposition to public health priorities.
  • Stock prices have been disconnected from economic fundamentals since well before the novel coronavirus outbreak. Federal Reserve policy is as much to blame for stock market volatility as the viral pandemic.

Cal Lutheran’s CERF provides county, state and national forecasts and custom economic analysis for government, business and nonprofit organizations. The Wall Street Journal, National Association for Business Economics, Reuters, NBC, The Washington Post, The Economist, CNN Money, and Pulsenomics/Zillow have included CERF forecasters in their surveys on economic policies and outlooks, home prices, jobs and the presidential election. For more information, go to clucerf.org.

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