Please consider a Comparison of CBO’s May 2020 Interim Projections of GDP and Its January 2020 Baseline Projections.
CBO Key Points
- CBO projects that over the 2020–2030 period, cumulative nominal output will be $15.7 trillion less than what the agency projected in January.
- CBO projects that over the 11-year horizon, cumulative real output (in 2019 dollars) will be $7.9 trillion, or 3.0 percent of cumulative real GDP, less than what the agency projected in January
- CBO also marked down its projection of nominal output because the
agency expects that inflation will be weaker as a result of the pandemic. - Lower projected inflation rates, particularly in 2020 and 2021, reduce the
level of prices and nominal GDP relative to what CBO projected in January.
That PDF was a summary sent to Senate Democrat Leader Charles Schumer.
Let’s investigate additional charts from the CBO report Interim Economic Projections for 2020 and 2021.
Unemployment Rate
Between February and April of this year, the number of people employed fell by more than 25 million and the size of the labor force by more than 8 million. In CBO’s projections, the unemployment rate is 15.8 percent in the third quarter of this year. After that, labor market conditions gradually stabilize and begin to improve more materially
Real Output
Although economic
conditions are projected to improve following their sudden drop, real output is expected to be 1.6 percent lower in the fourth quarter of 2021 than it was in the fourth quarter of last year.
Job Losses
The more than 20 million nonfarm payroll jobs lost during March and April were concentrated in industries that rely on a high degree of in-person interactions, including leisure and hospitality, retail trade, and educational services. The leisure and hospitality industry was hit particularly hard, losing more than 8 million of its 17 million jobs.
CBO Economic Projections
Employment Projection
Blue Chip Projections
GDPNow Model Projection for Q2 2020
GDPNow Forecast is Negative 51.2 Percent
The GDPNow Forecast is Negative 51.2 Percent.
GDPNow may be too pessimistic for Q2.
However, I believe the CBO and Blue Chip forecasts are too optimistic for the rest of the year.
Fed Can Print Money But It Cannot Print Jobs
I can find at least three instances of that saying dating back to 2010 so don’t give me credit.
Belts and Suspenders
However, I can claim a sarcastic Don’t Worry, the Fed has Belts and Suspenders
Unfortunately, all the Fed is doing is creating zombie corporations unable to survive expect with permanently low interest rates.
Grim Economic Data
- May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
- May 15: Retail Sales Plunge Way More Than Expected
- May 15: Industrial Production Declines Most in 101 Years
- May 15: GDPNow Forecasts the Economy Shrank by a Record 42%. It’s 40.4% as of May 28.
Ripple Impacts May Last Years
The economic data has been grim and the ripple impacts may last for years.
Global COVID-19 Risk Ranges Up to $82 Trillion
To understand the total global risk, please see Global COVID-19 Risk Ranges Up to $82 Trillion
Ripple Impacts
For a detailed synopsis of the state of the economy and the ripple impacts, please see The Economy Will Not Soon Return to Normal: Here’s Why.
Mish
“CBO Estimates it will Take 10 Years Just to Get Back to Even”
The Nasdaq is already almost back to even. Some evens count more than others.
From looking at the CBO charts, they are being too optimistic. They are predicting a V shaped recovery, and as of now, there is no evidence that is happening.
Perhaps it would have been more precise to say “there is no evidence this will happen in the imminent future” as I don’t think many were predicting anything good with GDP before Q3 at earliest. Not to disagree with your post – it seems very accurate, and worth expanding its breadth.
I wonder if anyone has tried calculating the muting effect on the economy of people not going back to their old ways (restaurants, hair cuts, crowds, etc) and for how long that effect might take to wear off fully, or as much as it ever will if not fully. I bet that number would bridge a lot of gaps between different forecasts when applied to those whose projections assume a return to full normal within 6-12 or even 18 months.
Last weekend I went for a cycle to a remote beach, where I met up with a dozen or so local fathers for a social distanced campfire and beer. Around 2/3rd are currently at home, paid 80% of their salaries by the government (UK). I was expecting a lot of complaints about money but EVERY ONE of them was better off and EVERY ONE was saying “now I know I can live on 80% I am going to be taking life a bit easier in future”.
That 20% is the money spent on holidays, beer, eating out, cinema visits, car purchases, coffee shops.
I think the muting effect is going to be huge. Listen to economists and they talk about the impact of “fear”. But fear is short term. None of those local fathers mentioned fear. They mentioned quality of life.
10 years…..everything I’ve read in the past says the baby boomers will no longer be as influential as a majority will die off in 10 years time. As long as they hold influence, pensions will not fail as they will vote until they die to hold on to the last grasp of their money. And what is the alternative if pension plans fail, etc??? The FED CANNOT let the voter’s cash fail but Emerging markets are dead with $$$ returning to the USA and growth as what % of 65 plus spend like they used to???
In a permanently collapsed (rotting)economy your options are limited at best!Sure big govt has borrowed /printed quadrillions over the last dozen years to buy time,and there in lies the problem! borrowing (printing) trillions and pretending everything is “booming”or in a never ending “recovery”might make you look good or feel better,it doesn’t come close to paying your bills!
With all due respect, CBO projections aren’t worth much. In fact, almost all economic forecasts have more in common with entrails reading than with a scientific endeavor. The only forecasts that are even worse because they haven’t even got a single thing right yet by sheer coincidence are those based on “climate models”. That said, it is blindingly obvious that a lot of wealth has been lost due to the lockdowns – which in hindsight seem to have had very little effect on the spread of the epidemic. A failure on all counts you might say.
“CBO Economic Projections”
…
First things first … check track record of subject. How did CBO do on last big boondoggle (ARRA)?
“Actual Economic Performance Fell Well Short of Projections”
I’m a pessimist but even the CBO looks like a worst case scenario. I still see the covid economy ending by fall. By Christmas we will wonder what the hell happen and how did it all end so quickly.
Sleep well kids, my friends old man building fireplaces from Norwegian stock, back in the 70’s “boom” stagflation years in so cal said of ripping assets inflation, “they got it all figured out ” , the FED that is….(I was his hoddy, making the mud, building the scaffolding, stocking the flue liner and brick),
50 freaking years his quote ringing in my ears, and can’t say he’s wrong.
So yeah, sleep well and easy, they got it all figured out. Please, don’t fight the fed.
Has anything they have predicted ever come true?
Nothing anyone predicts about “the economy” has a greater than random probability of coming true.
Randomizing the future, is what rational, optimizing actors do. Any sliver of non randomness, will immediately be exploited for gain, such that the economic future is immediately, again, fully randomized.
For anyone wanting to take time out from the 24hr tension msm is supplying, here is an hours easy/fun lecture on events three thousand years ago. Sort of similar topic because it is on the bronze age civilisation collapse, but far enough away to not spill anyone’s cup of tea. It just gives a bit of perspective, some ideas on how society and economy interact, or where they get stressed.
I’ve been aware of that video for a couple years now and it’s one of my favorite history videos
WTF! The guy is not even aware of civilizations in the East? China. India. ?? So typical of western historians, even today. The world is Europe. Blissfully unaware of what happens east of babylon. I didn’t bother to watch beyond the first minute, if he is so blind.
What did, and did not, happen to some civilization on some planet in Andromeda, wasn’t all that economically relevant for Babylonians back then.
There was so little interaction between the Andromedans and Chinese and Europeans back then, that he is very much justified in treating what happened to each of them, as independent of the others.
Well he is covering a major civilisational collapse, maybe the first that involves various very different civilisations. The Indus valley civilisation was contemporary, long lived and peaceful apparently, but faded out a few centuries before this, some say drought and plague, it was also trading with Egypt I think. There is still dispute over the Indus script or if it was writing as we understand it, same goes for Shang dynasty China, it was not multi civilisational as far as I know, its first writing is known from roughly the same time that those in the near east were being lost.
I don’t get the rebuff, Cline is covering one major regional event, which to us is quite/more relevant as it brushes straight into modern western politics, religion and philosophy. That does not detract from other history before or since or elsewhere though ?
OK, i get your points.@Anda , @Stuki. Maybe semantics; my understanding of the word ‘civilisation’ may be different from what is intended here, and I admit mine is probably wrong. The meaning I first got was ‘all civilisation’ ie human civilisation. I see that what he means is only the Babylonian civilisation.
Here you hunt for faint clues of collapse in archeological record, but we don’t need to go that far back. There is a more recent and ominous example: Easter Islands. There, population grew without restraint, spent energy and material resource worshiping phantom deities. Eventually all resources were gone, and the population descended into chaotic warfare, and cannibalism. I am sure there were a few smart people there, too.
History is littered with societal failures, of all kinds. I think what catches the attention here, or after the fall of the roman empire also maybe, is not only that it involves a large region with different peoples, but that you get a dark age afterwards, where knowledge is lost, where civilisation steps back to re-emerge later in a different direction. Easter island people I guess didn’t manage that, maybe they ran out of people to eat or something… if it weren’t for the statues though we probably would not think much of them?
You have to hunt for clues for a past failed civilization, but this one would be different: heaps of glass after the structure of skyscrapers rusts away, garbage dumps wherever you dig. The Tralfamadorians will marvel how such a dumb civilization could’ve survived for so long.
Grapes of Wrath, here we come!
What’s all ofthis recovery talk when we really haven’t recovered from the previous GOP administration yet…
The housing bubble was a bubble. That expansion rate from 2004 to 2008 Was not going to continue. Nor was the expansion rate from the dot com bubble.
Nope, it was a real break in long-term trend
Just goes to show that CBO estimates aren’t worth the silicon they are written on.
“But look at the rate of growth” is what we will hear over and over….
So …. you are basically saying Dow 400K?
Ok. Off we go.
Even if we manage to break even in ten years, by that time the national debt should be north of $50T and the Fed’s balance sheet could be over $20T.
That means the soundtrack of our lives for the next decade will be the constant brrrr of the money printer in the background. It’ll be this generation’s Beatles or Nirvana.