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Unprecedented Decline in Economic Activity

Please note Goldman sees Unprecedented Stop in Economic Activity, with 2nd Quarter GDP Contracting 24%.

Key Points

  1. Goldman Sachs economists forecast a historically sharp and swift recession, with second-quarter GDP sinking a stunning 24% after a 6% decline in the first quarter.
  2. The economists had expected a decline of 5% in the second quarter, after a flat first quarter but they said social distancing measures have affected many sectors of the economy and will hit the first and second quarter hard.
  3. The economists still expect a spring back in the third quarter of 12%, but they see unemployment peaking at 9%.

9% of the US Has Been Laid Off Due to the Coronavirus

A SurveyUSA poll shows 9% of the US Has Been Laid Off Due to the Coronavirus

I crunched the numbers based on those poll stats and come up with a U3 unemployment rate of 12% and a U6 rate of 39.7%. See the link for details and calculations.

Conclusion: Goldman is way too optimistic on the unemployment rate.

Other GDP Estimates

Delusional Forecast

Advice Ignored by Trump

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Fast Rebound Fantasies

I do not get these fast rebound fantasies and neither does Jim Bianco. He retweeted a Goldman Sachs estimate which is not the same as endorsing it.

I do not know how deep this gets, but the rebound will not be quick, no matter what.

Share buybacks, outsourcing to China, earnings, and ludicrous share prices based on forward PEs are all going to take a hit. Retired boomers will not be traveling as much as they thought. Countless small businesses will be wiped out.

Millennials still will not be able to afford houses. Consumers will need to rebuild savings cushions but their working hours will still be reduced. People will eat out less which will impact tips.

Many of those thinking of buying a new car will postpone that decision.

The Huge Fear: How Do I Pay the Bills?

Please note the Huge Fear: The Huge Fear: How Do I Pay the Bills?

That fear will linger a long, long time.

It is nearly crazy to project a fast rebound from this disaster.

This is not a 911 replay, nor is it anything the Fed or central banks can fix.

Mike "Mish" Shedlock