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It could take the US economy most of the next decade to recover from the coronavirus pandemic, the Congressional Budget Office said on Monday.
The CBO warns in a new analysis that the pandemic will reduce cumulative economic output over the next 10 years by $7.9 trillion, or 3% of GDP during the decade, compared to its projections from January. Without accounting for inflation, the damage totals $15.7 trillion, or 5.3% of GDP.
The CBO said the revisions reflect expectations of reduced consumer spending caused by business closures and social distancing. In addition, the recent drop in energy prices is expected to “severely” curtail investment in that sector, the CBO warned.
Recent legislation, which includes more than $2 trillion in stimulus, will only partially mitigate the economic fallout caused by the pandemic, the CBO said.
The big caveat: The CBO cautioned that there is an unusually high degree of uncertainty around its forecasts because the course of the pandemic is unknown and it’s not clear how the economy will respond.
The report from the highly respected government number crunchers further challenges hopes for a speedy economic recovery from the pandemic, which had been a common talking point in the early days of the crisis.
More than GDP: If recent history is a guide, it could take even longer for the labor market and household wealth to recover.
The 2008 global financial crisis took a much smaller bite out of GDP than what experts expect to see as a result of the pandemic. But 10 years after the Great Recession began, labor force participation rates for prime-age workers remained depressed in the United States, and household wealth had only started to recover.
Neil Shearing, the group chief economist at Capital Economics, said that most major economies are in a similar position — at least in the medium term —despite the recent pick up in high frequency data such as road traffic and electricity consumption.
“While the slump in output caused by the virus seems to have bottomed out, the recovery is likely to be slow going and uneven. Most economies are still likely to be below their pre-virus paths of GDP by the end of our central forecast horizon in 2022,” he wrote in a research note on Monday.
He cited three big reasons why a recovery in high frequency data doesn’t tell the whole story.
Reason 1: The recovery follows an extreme economic chock. “The fact that activity is recovering needs to be seen in this context of the huge loss of output incurred during lockdowns. Output in most major economies is still running at somewhere between 15% and 25% of pre-virus levels,” he said.
Reason 2: High frequency data doesn’t tell us much about what’s going on with demand —one of the biggest factors in any rebound. “The fact that more journeys are taking place is encouraging, but the extent to which this will translate into a recovery in consumer spending is unclear,” he said.
Reason 3: Governments and central banks still need to figure out how to transition from crisis mode to recovery, and to reopen their economies in ways that don’t do more damage.
“Policy needs to shift from combatting a crisis to supporting the recovery,” said Shearing. “Making this transition will not be easy. One of the biggest risks in the near-term is that governments move too quickly to embrace a new round of austerity.”
A walkout at Facebook
Some Facebook employees staged a virtual walkout on Monday to protest CEO Mark Zuckerberg’s decision not to take action on a series of controversial posts from President Donald Trump.
As part of the walkout, employees took the day off work. Managers at Facebook have been told by the company’s human resources department not to retaliate against staff who are planning to protest, or to make them use paid time-off, a source told CNN Business.
The public pushback from employees comes after growing scrutiny of Facebook’s inaction following controversial posts from the president. Trump and Zuckerberg spoke on the phone Friday.
What employees are saying: Jason Stirman, a design manager at Facebook, said he disagreed with Zuckerberg’s decision to do “nothing” about Trump’s recent posts. “I’m not alone inside of FB. There isn’t a neutral position on racism,” he wrote in a tweet on Saturday.
Andrew Crow, head of design for Facebook’s Portal devices, said on Twitter: “Giving a platform to incite violence and spread disinformation is unacceptable, regardless who you are or if it’s newsworthy.” “I disagree with Mark’s position and will work to make change happen,” he added.
Katie Zhu, an Instagram employee, tweeted that she was taking Monday off and that she’s “deeply disappointed” and “ashamed” with “how the company is showing up.” Zhu encouraged others who work for Facebook’s apps to join her and “organize.”
While only a small number of Facebook employees are currently speaking out compared to Facebook’s overall workforce of about 48,000, the protests underscore the company’s difficult position.
Taking action on Trump’s posts risks angering the White House and conservatives, who have long complained of alleged bias on the platform and are threatening new regulations, but doing nothing could alienate some of Facebook’s top talent.
What black CEOs are saying
Just four Fortune 500 companies in America have black CEOs. Three of them are speaking out following the death of George Floyd.
Jide Zeitlin, CEO of the luxury goods brand Tapestry, which owns Kate Spade, Coach, and Stuart Weitzman, posted a personal message on LinkedIn to his employees.
“I sat down several times to write this letter, but stopped each time. My eyes welling up with tears. This is personal,” Zeitlin wrote.
“We can replace our windows and handbags, but we cannot bring back George Floyd, Ahmaud Arbery, Breonna Taylor, Eric Garner, Trayvon Martin, Emmett Till, and too many others,” he added.
Lowe’s CEO Marvin Ellison posted a letter to his team on Saturday.
“I grew up in the segregated south and remember stories my parents shared about living in the Jim Crow South,” he wrote. “So, I have personal understanding of the fear and frustration that many of you are feeling.”
Merck CEO Ken Frazier told CNBC on Monday that he could have just as easily been George Floyd.
“What the African American community sees in that videotape is that this African American man, who could be me or any other African American man, is being treated as less than human,” Frazier told CNBC.
Frazier said that “huge opportunity gaps” exist in America.
“It is the responsibility of corporate America to bridge those gaps,” Frazier said. “If we don’t try to create opportunities for these people to be employed — joblessness creates hopelessness.”
Up next
Dick’s Sporting Goods will publish earnings before the opening bell.
Also today: CrowdStrike and Zoom earnings are up after the close
Coming tomorrow: ADP private employment report; US services data; Campbell Soup earnings
