The stress and pain caused by coronavirus have been felt around the world and has caused a crushing blow to the US economy. This COVID-19 pandemic is considered the worst since the post-war era.
According to the Labor Department, US employees lost 701,000 jobs in March and the unemployment rate reached 4.4%. Non-essential businesses were forced to close down to help reduce the spread of COVID-19. This virus has infected 11 million people around the world and was responsible for over 60,000 deaths.
The jobs report is bleak, ending the monthly gains that were in place since September 2010 and is showing signs of what might lay ahead of us.
The decline in non-farm payrolls of 701,000 jobs showed a sharp reversal from a strong January and February and is going to become worse over the months ahead. The Bureau of Labor Statistics surveys are attempting to catch up with the fact that significant economic shutdowns across the United States, according to Rick Rieder, chief investment officer from New York-based BlackRock which handles well over $7.4 million investments.
The coronavirus has forced states to issue “stay-at-home” orders which are limiting customer traffic for businesses who are considered essential and allowed to remain open.
The extent of the economic damage by the pandemic is still unknown. Wall Street is expecting the fallout to be enormous but did not include the 10 million Americans who filed for unemployment benefits over the past several weeks.
Economists with investment banks on Wall Street are predicting the gross domestic product decreasing by at least 30% during the second quarter.
Since Friday’s dire report, Ellen Zentner, chief economist at the investment bank Morgan Stanley, lowered her growth forecast for the second quarter domestic product to a negative 38% on an annualized basis. She believes the US economy will lose 21 million jobs raising the unemployment rate to 15.7% which is a level not seen since the Great Depression.
She believes the recovery of the US economy will be more drawn out than originally predicted with a serious drop into a recession which will take longer to climb out of. She also believes the economy will expand at annualized rates of 20.7% and 15.9% during the third and fourth quarters.
Zentner sees a full-year real GDP to decrease by 5.5% which would be the steepest since 1946 when there was a huge demand for wartime production that ended after the surrender of the Axis powers during WW2. Savita Subramanian, equity and quant strategist with Bank of America believes this will be the harshest recession in a post-war era causing S&P500 earnings to fall by 29% which is the worst since the drop seen during a recession. Stocks will drop to $115 per share in 2020.
The index gauge will probably rally to 2,600 by year’s end at 4% at closing. But anyone who expects a sharp turn around from February’s all-time high of 3,386, is in for a big letdown.
With all the gloom and doom, some conditions today are more favorable to rebound than the conditions during the earlier downturns.
The coronavirus has been a very difficult path for the American people but there is light at the end of the tunnel. The citizens are actually working together, helping each other out and doing what is necessary to get through this difficult time. I believe we will come out of this stronger and more united than ever before.