Unemployment to average 6.1 percent through 2030: CBO

Unemployment to average 6.1 percent through 2030: CBO
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The COVID-19 pandemic will leave lasting scars on the U.S. economy, which will have an average unemployment rate of 6.1 percent through 2030, according to new projections from the Congressional Budget Office (CBO)

The January projection pegged average unemployment over the decade nearly 2 full points lower, at 4.2 percent. The latest projection puts the average rate for 2020 at 10.6 percent and says it will drop to 7.6 percent by the end of next year. Average unemployment remains above 5 percent until 2025 in the CBO report.

Likewise, the overall size of the economy is projected to be 3.4 percent lower each year through 2030 than pre-pandemic projections showed. 

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"Real (inflation-adjusted) gross domestic product (GDP) is expected to grow at a 12.4 percent annual rate in the second half of 2020 and to recover to its prepandemic level by the middle of 2022," the report said. 

CBO projected that the economy would begin a rapid rebound in the third quarter, which began Wednesday, after shrinking significantly in the second quarter, but fail to reach its prior levels.

"Following that initial rapid recovery, the economy continues to expand in CBO’s projections, but it does so at a more moderate rate that is similar to the pace of expansion over the past decade," the nonpartisan budget office found in its report. 

The CBO report, however, may already be somewhat outdated. It was based on data that went through June 26, as COVID-19 cases were starting to break records again and a slew of states moved to reverse their reopening plans. 

While CBO projected that unemployment would top out at more than 14 percent in the third quarter of the year, the Labor Department on Thursday said unemployment had dropped to 11.1 percent in June. Analysts note that the "real" unemployment rate may be significantly higher owing to classification issues and a slew of workers leaving the workforce during the pandemic.

Shai Akabas, director of economic policy at the Bipartisan Policy Center, said the report showed the long road ahead for the recovery, despite the good jobs numbers.

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"This morning’s jobs report reflects the resumption of many business activities but a true recovery cannot begin until the virus is mostly under control, a reality that seems more distant with each passing day," he said. 

While the increase in jobs is fueled by businesses coming back online from closures, he said, there would be many businesses and jobs that simply don't come back.

"Many businesses are gradually realizing that conditions won't return to anything close to normal in the near future and are recalibrating their workforce accordingly," he said.