Goldman’s Joseph Cohen Sees ‘Awful’ Data Before Growth
Goldman’s Joseph Cohen Sees ‘Awful’ Data Before Growth
(Bloomberg) -- The U.S. economy will see the biggest damage in the next couple of months from the coronavirus lockdowns, and unemployment will surge before growth starts to recover later this year, Goldman Sachs Group Inc.’s Abby Joseph Cohen said in an interview on Bloomberg TV.
“The demand shock is heavily concentrated in services, of course, and we think that from a time standpoint, April and May will bear the brunt of it because of the constraints on all of us in terms of whether we can get around,” the senior investment strategist said. “What we’re hoping is that when we get to the latter part of this year, and some of these physical constraints imposed on us are lifted, we’ll start to see that the economy can begin to recover in a better way.”
Goldman economists expect the U.S. economy to shrink an annualized 34% in the second quarter before expanding by 19% in the third, while forecasting that the jobless rate will soar to 15% by mid-year as the lockdowns weigh on employers.
U.S. equities are coming off their worst quarterly slump since the aftermath of the Lehman Brothers collapse in 2008 on worries about the fallout from the pandemic. The ADP Research Institute data on Wednesday showed employment at U.S. firms declined in March for the first time since 2017 and businesses’ payrolls dropped by 27,000. The report precedes the widely monitored non-farm figures from the Labor Department due on Friday.
“The most accurate numbers we’ll get on a real-time basis most likely will be the labor market data, we’re expecting those to look pretty awful over the next several months,” said Joseph Cohen, who in the 1990s was the most famous equity strategist in America.
Several major U.S. retailers are halting pay for hundreds of thousands of workers as they struggle to cope with the slump in demand caused by measures to control the spread of the virus. President Donald Trump recently extended U.S. “social distancing” guidelines to contain the virus until the end of April, abandoning his ambition to return American life to normal by Easter.
Joseph Cohen praised the actions of the U.S. Federal Reserve, saying that monetary stimulus is “having the desired effect.” Since the start of the coronavirus crisis in the U.S., Goldman strategists have been concerned about the availability of capital to small and mid-sized businesses and individuals as well as their solvency, according to her.
Optimism about the unprecedented stimulus measures boosted U.S. equities over the past week, tempering losses in the first quarter.
The Goldman strategist also noted that the U.S. banking system is now in a “much better shape” because of the measures that had been taken following the 2008 financial crisis.
The impact of the pandemic has highlighted economic and income disparities across the U.S., she said.
“This health crisis is unveiling a number of problems and stresses within the economy that perhaps were hidden,” said Joseph Cohen. “We’re going to need as a country to think about what we’ve learned in terms of variations in access to health care, variations in access to employment and so on.”
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