- A senior economist at the University of California Los Angeles predicted the US economy’s gross domestic product will shrink by 42% in second-quarter-2020, before recovering in early 2023.
- “It will take time for all the king’s horses and all the king’s men to put the economy back together again,” David Shulman wrote in UCLA’s June 2020 economic outlook report.
- Among other key projections, UCLA anticipates that employment in the US won’t recover until well past 2022, and a coronavirus vaccine will only be available by early 2021.
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The US economy faces a rough and gradual comeback from its massive pandemic-induced decline, according to UCLA Anderson’s latest economic outlook.
“Make no mistake, the public health crisis of the pandemic morphed into a depression-like crisis in the economy,” David Shulman, a senior economist at UCLA, wrote in the report.
According to Shulman, calling the crisis a recession is a misnomer, as it is much worse than that.
UCLA, which ranks among top US business schools, sees the economy’s real gross domestic product declining by 42% annually in the second-quarter of 2020.
“It will take time for all the king’s horses and all the king’s men to put the economy back together again,” Shulman said.
The unsettling outlook comes amid a rapid increase in new coronavirus cases in the US, recording its highest single-day total of over 36,000 this week.
According to the report, “despite the Paycheck Protection Program, too many small businesses will fail and millions of jobs in restaurants and personal service firms will disappear in the short-run.”
The Labour Department released new jobs data on Thursday showing 1.5 million more jobless claims, bringing total filings over a 14-week period to about 47 million.
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Other key projections from UCLA’s report:
- The economy’s level of output as seen in the fourth-quarter of 2019 will not restore until early 2023, and will represent a “Nike swoosh” recovery, rather than a V.
- Employment will not recover until after 2022. The unemployment rate will hover around 10% in fourth-quarter-2020 and above 6% in fourth-quarter-2022.
- A “start-stop return” – temporary economic shutdown and restart – to normal levels will be seen with vaccine availability in early 2021.
- Inflation is expected to remain muted through to 2023, but by the mid-2020s the Fed’s 2% inflation target may be “handily exceeded.”
- Academic institutions will shrink or close, along with a reduction in demand for PhD’s.
In slight contrast to the above outlook, an IMF chief economist earlier predicted the COVID-19 pandemic would push most of the world’s recovery to 2022.