The economy is cratering deeper than we have seen in our lifetimes. Layoffs are coming so quickly, the state unemployment offices can’t keep up. Banks are flooded with calls about upcoming mortgage and loan payments. Downtowns are deserted, malls are closed, bars are empty, and airplanes are grounded.
A sudden stop in the economy so severe, Goldman Sachs economists now forecast real GDP growth of negative 9% in the first quarter and down an astonishing 34% in the second. Economists at Goldman Sachs expect the economy to recover mid-year with a 19% gain in the third quarter.
The biggest economy in the world has stopped. The demise is so swift, it hasn’t been reflected yet in the monthly data.
Consider Tuesday morning’s consumer confidence report a bit of nostalgia. It will likely show consumers’ confidence commensurate with a healthy economy.
Friday’s monthly jobs report will barely begin to reflect the devastating fallout in the jobs market. (Possibly the first month of net jobs losses in a decade, but not the earthquake the weekly data are showing.) The survey period was the second week in March, a time when Americans were just waking up to the threat of the virus and social distancing had not yet been implemented.
Economists at Goldman Sachs predict the jobless rate with hit 15% by mid-year.
The window into the carnage comes in the weekly data. We learned last week 3.28 million Americans filed for jobless benefits for the first time.
This week will probably show millions more layoffs. Moody’s Analytics chief economist forecasts another 4.5 million first-time filings for jobless benefits this week, which would be the highest in history.
It all makes the quick and efficient rollout of the stimulus incredibly urgent. Promises from the White House to have stimulus checks direct-deposited in three weeks – and small business loans available Friday – are aggressive and absolutely necessary. Today is the end of a quarter and tomorrow the beginning of the month. That means bills are due for business and consumers. But the emergency government rescue funds have not arrived yet.
And it can’t end there. Rather than an actual “stimulus,” this record-setting effort is simply a life-preserver to keep Americans afloat. If done right, it may stop the losses. But more stimulus will have to come later, with more Congressional spending expected and lawmakers signaling they are willing.
Meantime economists have no playbook here for the damage done to the economy.
In just seven weeks, the stock market crashed from record highs. At the worst, the Dow was down more than 30%. Then last week staged the biggest rally since the Great Depression.
The violence of those moves reflects how unprecedented this automatic shut-off of the economy is. And the vast uncertainty of how – and when – it will restart.