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April Monthly Dashboard: The next recession has arrived

April 24, 2020
  • illustration of a current scorecard indicating negative
  • illustration of a future scorecard indicating negative

Monthly Review (Page 3)

The COVID-19 economic shutdown has had an immediate and dramatic impact on U.S. economic conditions. There were 701,000 reported job losses during March and initial jobless claims have spiked to unprecedented levels with 22 million workers applying for unemployment insurance in the span of just four weeks. It is likely that millions of job losses and a double-digit unemployment rate will be reported for April. Correspondingly, consumer spending hit a wall in March as retail sales plunged with consumers told to stay at home while many businesses were forced to close operations. All businesses are challenged by the sudden shutdown, including small and medium-sized enterprises as small business optimism fell sharply in March. The Federal Reserve continues to expand its unprecedented policy measures to ensure financial market stability, including new credit programs for businesses and ample asset purchases. The record-breaking fiscal stimulus will also help to keep workers on payrolls (at least for a while) and support small businesses. Broad domestic equity market indices have recovered about half of the breathtaking declines from their February highs, while interest rates remain at or close to all-time lows.

Outlook (Page 4)

The COVID-19 recession is expected to produce an extremely sharp, albeit relatively short, economic decline with real GDP falling by 6.6 percent in 2020 and unemployment rates spiking above 15 percent. When this downturn actually ends will depend upon how the virus propagates, how governments respond, and how quickly and effectively anti-viral regimes (and eventually vaccines) can be provided in suitable quantities. These are all highly uncertain currently. The most likely outlook is that social distancing mandates will ease over the late-spring and early summer, allowing the economy to slowly restart. Economic activity should rebound in the fourth quarter and into 2021, maintaining a strong pace in response to pent-up demand as well as the massive government and Fed stimulus efforts. There remains a reasonable chance, however, of a prolonged shutdown for the economy in response to a significant reoccurrence of the virus, extending the downturn into next year when a vaccine is more likely. Highly accommodative monetary policy from the Fed should continue at least until late 2021 while the federal government rolls out its record stimulus — helping to ease the economic burden for business and consumers. Longer term interest rates are expected to remain near record lows for much of 2020, before climbing modestly by year-end and in coming years.

Go deeper with the full April dashboard linked below.