A panel of top bank economists said it expects the American economy to shrink more than 5 percent and unemployment to remain above 10 percent through the end of 2020, according to projections released Friday.
The American Bankers Association's (ABA) Economic Advisory Committee — a group of 16 economists from major U.S. and Canadian banks — released a forecast Friday that projects a deep economic decline through the first half of 2020 that begins to correct by the summer.
The median decline in gross domestic product (GDP) growth from the committee members' individual forecasts was 5.4 percent from the end of 2019 to the end of 2020. The median unemployment rate projected for the end of 2020 by the committee was 10.9 percent, falling to 8.4 percent in 2021 and 5.9 percent in 2022.
Uncertainty in the economy was evident in the differing views of the individual members of the committee, as their projections varied greatly depending on how badly the bank’s affected area was hit by the coronavirus pandemic and the economic devastation it has caused throughout the country.
“There's just so much uncertainty with regard to consumer and business behavior, the pace of the virus, our prospects for the global economy and how that feeds back to the US,” said Catherine Mann, the global chief economist for Citibank and the chairwoman of the ABA forecasting panel.
“We're not going to try to shoehorn our projections into a narrow band with a pretension of limiting the degree of uncertainty that we have.”
The coronavirus pandemic has claimed the lives of more than 100,000 Americans while plunging the U.S. economy into the deepest economic downturn since the Great Depression. More than 40 million Americans have filed new claims for jobless benefits as the unemployment rate rose to 14.7 percent in April, according to the Labor Department.
The uncertain path of the virus poses immense challenges for economists seeking to project how it will impact the U.S. economy and when Americans can expect to see a recovery. While economists broadly agree that a full recovery depends on scaling up U.S. coronavirus testing and tracing capacity, there are a wide range of views on how deep the damage will be until then.
“The decline and the pace of recovery depend on many factors that are ones that we do not yet really know how to gauge,” Mann said.
Four of the panel’s economists expected GDP to drop less than 5 percent over the year, while four projected a decline of more than 8 percent. Projections of the unemployment rate by the end of 2020 range from less than 7 percent to 18 percent, while expectations for 2021 ranged from less than 5 percent to 13 percent.
Mann attributed the wide range of views to the differing prevalence of COVID-19 cases in the operating areas of banks represented on the advisory committee.
She also noted that hot spots in highly populated and business-dense areas such as New York and California can have a deeper impact on the national economy while areas that avoided heavy exposure may rebound quicker than the national averages.