Economic depression is on the table. What was once a Trump Slump in 2018-19 got a bad case of the coronavirus in 2020.
James Bullard’s Dire Economic Depression Warning
While most commercial banks and forecast agencies are still somewhere between the still god-awful -5% and -30% US GDP in the Second Quarter* (for whatever it’s worth, our best guess at Trump Slump World is around -20%, and rising by the hour, but that is soooo beyond any degree of certainty), the St. Louis Fed President James Bullard spoke with Bloomberg News Sunday and went as far as to say a never-before-seen, fully depressionary -50% drop in US GDP is possible in the April through June quarter.
In addition to this mind-numbing drop, Bullard went on to say that the U-3 Unemployment rate in the US could hit 30% by summer, a higher rate than which occurred at any time during the Great Economic Depression of the 1930s.
*Morgan Stanely just updated: -30% US GDP in Q2. Talk about economic depression. The powerhouse banks are now running -20% to -30% drop!
As if watching as our beloved friends and family get infected with this horrible virus, and likely even ourselves if current trends continue into spring and summer, we may also be enduring massive business failures, record-long unemployment lines (virtual if not also in person), and more.
Despite such a downbeat forecast for the rest of spring and summer, Bullard has hopes of a massive rebound in the third quarter, saying: “I would see the third quarter as a transitional quarter,” with the rest of the year “quite robust” as pent-up demand from consumers more than ready to break their cabin fever go crazy. “Those quarters might be boom quarters,” Bullard added.
Let’s hope he is 1. Much more wrong about Q2, and much more right about Q3 & Q4. But we also need to be honest. No slowing down of the coronavirus impact on the economy by Q3/Q4, likely no sufficiently strong rebound at all this year to break the grips of what would by that time definitely be an economic depression.
Let’s hope it’s not a multi-year one!
Unemployment May Soar to 30%, Fed’s Bullard Says
Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product…
“This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” Bullard said. “The overall goal is to keep everyone, households and businesses, whole” with government support. “It is a huge shock and we are trying to cope with it and keep it under control.” ..
The St. Louis Fed’s view of the virus-related shutdowns on the economy is more dire than Wall Street. JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period while Bank of America Corp. and Oxford Economics both see a 12% drop. Goldman Sachs Group Inc. sees a 24% plunge.Bloomberg.com