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.
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.
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.
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.
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
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.