GOLDMAN SACHS FORECASTS STEEP DROP IN US GROSS DOMESTIC PRODUCT; JOBLESS RATE COULD RISE TO 9%
(Apr.7, 2019, /staffingindustry.com/)Goldman Sachs forecast a sharp drop in US gross domestic product and a surge in the unemployment rate to 9% amid the Covid-19 pandemic in a report released Friday. It expects declines in services consumption, manufacturing activity and building investment to lower the level of GDP in April by nearly 10%.
“News reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed, as well as shutdowns of many schools, stores, offices, manufacturing plants, and construction sites,” according to the report.
Goldman Sachs expects quarter-over-quarter annualized GDP growth rates of -6% in the first quarter and -24% in the second.
It forecast growth to return to the US in the third quarter with an annualized growth rate of 12% and in the fourth quarter with a growth rate of 10%.
“The sudden stop in US economic activity in response to the virus is unprecedented, and the early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway,” according to the report.
Shutdowns in some states to slow the spread of Covid-19 are further reducing the level of economic activity.
The unemployment rate could rise to 9% in the next couple of quarters, the report said. However, it noted a risk to its forecast is the headline unemployment number could rise by less if shutdowns prevent workers from actively looking for work - a requirement for being counted as unemployed in the number.
It noted the sudden disruption of cash flow is causing many companies to lay off workers immediately because they cannot afford to pay them. In more typical slowdowns, profitable businesses tend to lay off workers more gradually as business dries up.