By Jack Rasmus
The US will lose 2 million jobs just in March (Bloomberg News). US GDP will fall by -24% to -30% in second quarter (Goldman-Sachs & Morgan-Stanley Banks). Jobless rate could rise to 30% ( St. Louis Fed Governor, Bullard). Federal Reserve promises $4T more to pre-bail out banks (Marketwatch). Financial markets imploding and credit system on verge of freeze up. Trump and US politicians considering sending people back to work despite higher cost in infections and deaths from the virus!
A month ago, in late February 2020, I was convinced the recession I have been predicting since January 2019 had arrived. Two weeks ago I began writing this would be another ‘Great Recession 2.0’, as in 2008-09. Now I’m not so convinced of even that. It may be worse, much worse.
US Real Economy Contracting Faster Than 2008 or 1932
Just last week Goldman Sachs investment bank was predicting a -14% contraction of the US real economy in the second quarter, April-June 2020. Morgan Stanley followed with its prediction of a -30% drop in US GDP. Goldman has since modified its initial forecast to -24%.
This compares with the worst quarterly decline in 1932, in the depths of the Great Depression of the 1930s, of -13%. The current contraction, in other words, is coming faster and deeper than any on record previously—whether compared to the 2008-09 Great Recession or the 1930s Depression.
As of the close of March 2020, about a third of the US economy is now shutdown. More is about to follow. The US regions most directly and heavily impacted by the coronavirus—Washington State, California and New York—are where business activity has virtually shut down except for emergency services. Other areas, like Illinois, Texas, and Florida are catching up fast.