Washington, May 19 (efe-epa).- The US gross domestic product will fall by an annualized 38 percent during the second quarter of this year due to the social distancing measures implemented to limit the spread of the coronavirus, a situation that will mean an end to the longest US economic expansion since World War II, according to the forecast released by the Congressional Budget Office on Tuesday.
In a report containing its preliminary outlook for the rest of this year and 2021, the CBO expects the US labor market to suffer its worst deterioration since the 1930s, with an average of 15 percent unemployment compared to the 4 percent figure from the fourth quarter of 2019.
The CBO projects that the US economy will contract at a 37.7 percent annual rate between April and June, but then partially bounce back, expanding at a 21.5 percent annual pace in the July-September period.
“The economy is expected to begin recovering during the second half of 2020 as concerns about the pandemic diminish and as state and local governments ease restrictions,” the CBO said in remarks accompanying its figures.
“The decline in economic activity has been so rapid and so recent that the depth of the downturn is still uncertain, and the data on spending are preliminary and incomplete,” the office wrote.
The CBO said that the economic stimulus funds approved so far will hike the federal deficit by some $2.1 trillion during Fiscal Year 2020 and another $600 billion in 2021, levels that equate to about 11 percent of nominal GDP in Fiscal 2020 and 3 percent in 2021.
Regarding the unemployment rate, the CBO said that it rose from 3.5 percent in February to 14.7 percent in April, reflecting a reduction of more than 25 million people on the payrolls and a decline of some 8 million people in the labor force as a whole.
“During the second quarter of 2020, the labor market is projected to see the steepest deterioration since the 1930s,” the CBO said.
The office said it expects the jobless rate to peak in the third quarter, averaging almost 16 percent, but then decline steadily during a lengthy economic recovery and remaining at just under 9 percent into the fourth quarter of next year.
“The persistence of social distancing will keep economic activity and labor market conditions suppressed for some time,” the CBO said.
On Tuesday, Treasury Secretary Steven Mnuchin warned of the risk of “permanent damage” to the US economy if the coronavirus quarantines remain in place. The secretary appeared in a teleconference before the Senate banking committee to discuss the economic outlook and the effectiveness of the $2.2 trillion rescue package approved in April.
Meanwhile, Federal Reserve Chairman Jerome Powell asked Congress during that same committee hearing to approve more fiscal stimulus funds, saying that the measures taken to contain the coronavirus represent an investment in the country’s individual and collective health.