The US economy is losing steamThe cases continue to spread across the country, and Congress is delaying the adoption of another coronavirus aid package to help millions of American workers and small business owners weather the storm. This raises concerns about a possible slowdown in economic growth early next year, which would mark the first “double dip” recession in the US since the early 1980s.
JPMorgan Chase’s top economist Michael Feroli told clients last week that the recent surge in the coronavirus and renewed restrictions to contain its spread has increased layoffs and economic activity by around US $ 50 billion in the first three months of 2021 Dollars would decrease. This equates to an annualized decline in gross domestic product – the total value of products and services in the US – of around 1%. This would also hinder a sustained rebound from spring pandemic lockdowns, which rebounded rapidly between July and September with the reopening of businesses, but which now appear to be slowing.
“If the virus strains activity and leads to temporary or other business closures, we think related layoffs would occur,” Feroli said in the JPMorgan Chase report. “The COVID-19 resurgence seems to have already increased [consumer] Mood. . . and we believe the virus could have increasingly negative effects. “
JPMorgan Chase, the largest bank in the US, is not only warning of a double dip. In the past few weeks, the economic forecasts of two major rating agencies, Moody’s and S & P Global, have sounded the alarm.
Mark Zandi, chief economist at Moody’s Analytics, told CBS MoneyWatch that he expected the economy to contract at an annual rate of 1.5% in the first quarter of next year – equivalent to a $ 25 billion decline in national income per month .
Despite these concerns, many economists do not expect the US to slide back into recession. And, of course, the Dow Jones Industrial Average topped 30,000 for the first time on Tuesday, a sign of investor optimism that may stir the sails of the overall economy.
On average, forecasters expect the US economy to grow at a rate of 3.3% early next year. This is the result of a recent survey by the US government Wall Street Journal. However, it is not clear to what extent these estimates are based on the assumption that the US will adopt a major stimulus package before the end of the year to help support workers and businesses in trouble.
This is what Wall Street has generally expected for some time. But Republicans and Democrats haven’t been able to get a deal on how big that isshould be. Many now think that further incentives are not likely until after Mr. Biden’s tenure begins on January 20th. And even then, it might take some time. Moody’s Zandi sees February as the most likely month for additional stimulus from Washington.
In the meantime, there have been recent signs that the economic situation is deteriorating. On Wednesday,that the number of Americans seeking unemployment benefits, which had been falling recently, rose for the second straight week. Consumer spending in October was weaker than expected. The situation will worsen as coronavirus cases rise and unemployment benefits run short for millions of Americans.
“The data shows a greater than expected loss in consumption momentum, and it did so before the spread of COVID-19 increased in early November,” JPMorgan Chase’s Feroli wrote.
On Tuesday, Michelle Meyer, a top US economist at Bank of America, predicted a rocky start to the new year. “We’re seeing the economy come to a standstill next year,” Meyer told journalists during the bank’s annual outlook for the economy.
Bank of America economists expect COVID cases in the US to continue to rise – and that “containment measures” will increase.
“We’re not out of the woods yet,” said Ethan Harris, BofA’s leading global economist. wrote in his Outlook 2021. “We are still in the emerging part of the COVID curve and it will take a few weeks to assess the damage to public health and the economy.”