The Congressional Budget Office projected Monday that social distancing efforts would decline significantly in the second half of 2020, but that it would take time for jobs and the GDP to bounce back.
In a new economic report released Monday, the nonpartisan budget office projected that social distancing would continue during the second half of 2020 but to a declining degree. The agency expects that, from that peak, social distancing will drop by roughly two-thirds during the second half of this year and diminish further by smaller amounts, through the third quarter of 2021.
However, taking into account the possibility of the pandemic reemerging, the “persistence of social distancing will keep economic activity and labor market conditions suppressed for some time.”
The budget office projects that in the second quarter of 2020, GDP will contract by 11%, and the number of people employed will be almost 26 million lower than during the fourth quarter of 2019. Unemployment will have only dropped to 8.6% by the end of 2021.
The agency also says that economic conditions are projected to improve following their sudden drop from the coronavirus shutdown, but projected that the recovery would take time and be gradual, looking more like a swoosh rather than the V-shaped recovery President Trump has predicted.
The agency estimated that as long as some degree of social distancing was occurring, the economic boost that might be expected from recent coronavirus relief legislation would be smaller than it would be during a period of economic decline without social distancing. The CBO also projects that consumer spending will fall by more than 11% in the second quarter of 2020 as social distancing measures constrain and dampen spending.
The budget office projected the unemployment rate would be 15.8% in the third quarter of this year, but after that, the job market would gradually stabilize and begin to improve.
