The Congressional Budget Office estimates that the nation's real gross domestic product will drop 11% during the second quarter of 2020 in new economic projections that factor in the impact of the COVID-19 pandemic.
The projected second quarter contraction is equivalent to an annual decline of 38%, according to the CBO.
The new report also projects that social distancing policies that virtually shut down the nation's economy during the first quarter of 2020 will cost more than 25 million people their jobs by the end of the second quarter this year. It projects that unemployment — which rocketed from 3.5 % in February to 14.7 % in April — will continue rising to 15.8 % in the third quarter before the labor market will stabilize.
Job losses were not uniform but were concentrated in industries that rely on "a high degree of in-person interactions," including leisure and hospitality, retail trade, and education and health services, according to the CBO. In March and April, the leisure and hospitality industry lost eight million of an estimated total of 17 million jobs, the CBO report said.
CBO's projections are based on the assumption that current laws generally remain unchanged and that no significant additional emergency funding is provided, unlike some private-sector forecasts.
It also projects that social distancing, which peaked nationally in April, will continue, but to a declining degree. The agency expects that, from its peak, social distancing will drop by roughly two-thirds during the second half of this year and diminish further, but by smaller amounts, through the third quarter of 2021.
As a result, the labor market is expected to materially improve after the third quarter; hiring is expected to rebound and job losses will drop significantly as the degree of social distancing diminishes and stay-at-home orders are eased, according to the CBO's new projections.
But even though the economy is expected to begin recovering during the second half of 2020, the CBO estimates the recovery will not make up for earlier losses. The unemployment rate is projected to remain high at an estimated 11.5 % for the fourth quarter, the CBO report said.
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R. Robin McDonald
Daily Report reporter R. Robin McDonald's journalism career includes stints as a staff writer at The Atlanta Journal-Constitution, The Fort Worth Star-Telegram, The Wichita Eagle, and The Anniston Star and as a trial tracker at CourtTV and CNN. She is the author of two true crime books -- Black Widow: The True Story of the Hilley Poisonings and Secrets Never Lie: The Death of Sara Tokars.
