Production in the world’s biggest economy is expected to nearly halve this second quarter according to the Congressional Budget Office (CBO).
“Inflation-adjusted gross domestic product (real GDP) is expected to decline by about 12 percent during the second quarter, equivalent to a decline at an annual rate of 40 percent for that quarter,” they say.
That 40% is the seasonally adjusted annual rate (SAAR) which tries to remove seasonal variations in the data to provide a clearer view of nonseasonal changes so that production during spring for example can be accurately compared to production in winter or summer.
That makes it a huge fall especially as they have included in their data recent legislation like the $2 trillion stimulus.
“Real GDP at the end of 2021 would be 6.7 percent below what CBO projected for that quarter in its economic outlook produced in January 2020,” they say.
Making their projection in line with suggestions GDP would fall by 10% this year, not far off from the Great Depression levels of 15%.
“Overall, if laws currently in place governing spending and revenues generally remained unchanged and no significant additional emergency funding was provided, the federal deficit would be roughly $3.7 trillion in fiscal year 2020 and $2.1 trillion next year… In CBO’s March baseline projections, deficits were just over $1 trillion in each of those years,” they say.
The government is expected to borrow an additional $3.7 trillion, they say, which is roughly how much the federal government receives in total taxes every year. Meaning they have to borrow this year as much as their entire income, and next year they have to borrow twice more than last year.
If they didn’t have a printer that technically would make them pretty much bankrupt because their total debt is now close to 10x their total income.
More interesting perhaps are their unemployment figures. They say the workforce “is projected to decline from 63.2 percent in the first quarter of this year to 59.8 percent in the third quarter.”
So about 4% of those that were working are now just going to drop from the market for many reasons, including early retirement or longer periods of study than might have been necessary.
CBO however doesn’t quite suggest why they might drop out, but they clearly indicate there will be structural changes which may have medium to long term effects on wealth.
“The unemployment rate is projected to average 15 percent during the second and third quarters of 2020, up from less than 4 percent in the first quarter,” they say, further adding:
“The unemployment rate is projected to decline to 9.5 percent by the end of 2021.”
So in nearly two years, unemployment will be at close to 10%. Meaning 15 million fit and able men and women who want to work, will be unable to find a job in the United States.
This is a preliminary view with a full report later this year, but the government’s financial watchdog is clearly suggesting we’re in for a second Great Recession that may be closer to a Great Depression thanks to the recent political decisions based on what now clearly seems to be very faulty projection models by epidemiologists.