The U.S. economy is set to contract by an unprecedented 24% in the second quarter as economic activity across the board grinds to a halt even more severely than many are currently predicting.
The grim estimate, published Friday by economists at Goldman Sachs, is among the most pessimistic on Wall Street, though comes as many economists continue to revise their forecasts for all economic measures downward as the coronavirus pandemic continues to spread.
If Goldman’s prediction holds, it would be the sharpest single-quarter decline in gross domestic product since the U.S. started measuring GDP in its current form. The current record for the largest quarterly drop was in the first quarter of 1958 when GDP declined 10%.
“Why such an extreme forecast, especially in Q2?," the economists' ask in their research note. "The sudden stop in U.S. economic activity in response to the virus is unprecedented, and the early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway.
“In some U.S. states, authorities have now issued statewide shutdown orders to slow the pace of virus spread and avoid overwhelming the healthcare system, measures that will further reduce the level of economic activity,” they said.
The obvious knock-on impact of that kind of growth contraction is unemployment, which the economists expect to jump to a 9% rate in the next couple of quarters, as “a surge in job losses appears to be happening very quickly.”
In a separate report published late on Thursday, Goldman Sachs economist David Choi provided an equally grim forecast of jobless claims, noting that even the most conservative assumption would be claims reaching over 1 million for the most recent week ended March 21, which would top the record high of 695,000 set in 1982.
He also estimated revenue declines in consumer-facing businesses including casino gambling, sports and entertainment, hotels, public transportation and restaurants dropping anywhere from 75% to 95%.