Trump’s Dire Forecast Reinforces Outlooks for Deep Economic Hit
Trump’s Dire Forecast Reinforces Outlooks for Deep Economic Hit
(Bloomberg) -- The White House’s presentation of projections for coronavirus fatalities to extend into the start of the summer will reinforce fears for extended shutdowns that spur deep declines in U.S. output and employment.
At a press conference Tuesday, President Donald Trump and virus task-force coordinator Deborah Birx discussed projections indicating that several hundred Americans could keep dying each day from Covid-19 through at least part of June, with as many as 240,000 total deaths. The president largely abandoned his optimistic tone from prior weeks, telling the U.S. to brace for one of its toughest stretches as a nation.
Such views are becoming more aligned with economists’ increasingly dire outlooks for plunging employment and a recovery later in the year that’s looking less likely to resemble a strong snapback. Goldman Sachs Group Inc. said on Tuesday it expected unemployment to soar to 15%, with gross domestic product contracting an annualized 34% in the second quarter.
Raymond James Chief Economist Scott Brown said Wednesday that for him and many other economists, the president’s forecast served to confirm their expectations.
“It’s not going to be anything close to V-shaped,” Brown said. “It’s not like you flip a switch and everything recovers.”
U.S. stocks slid on Wednesday as investors digested the new White House views, with the S&P 500 index down 4% as of 1:11 p.m. in New York, on track for its biggest decline since March 20.
Forced Shutdowns
Economists have been struggling to keep forecasts updated in light of rapid developments that have seen governments around the country ban non-essential business to prevent the virus from spreading, forcing stores and restaurants to close. A report Thursday is projected to show that more than 3 million Americans filed for unemployment benefits for a second straight week.
Ward McCarthy, chief financial economist at Jefferies LLC, said that while the president’s rhetoric on Monday aligned with his own thoughts on the situation, it could inspire others not yet convinced of the pandemic’s severity to treat it as a genuine threat.
“It’s not the precision of the forecast that matters, it’s the tone that matters,” McCarthy said. “And the tone is, from what we heard from the White House yesterday, is ‘This is really serious, folks. Take it seriously, and don’t do stupid things.’”
Analysts stressed that the economic outcomes remain difficult to predict given the range of uncertainty around how long people will need to continue social-distancing measures.
Oxford Economics Chief U.S. Economist Gregory Daco -- whose firm predicts more than 20 million jobs could be lost -- said that a lack of insight into the administration’s own modeling of the pandemic makes it tough to adjust the forecast to match.
“The longer and the more severe the lockdown, the sharper the economic hit,” Daco said. “Our current assumption of a 10-to-12-week shutdown is actually more severe than what the administration is talking about.”
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