Economists scaled back their pessimism on the employment outlook for this year following the surprise improvement in the Mayjobs report, but they continue to see only a gradual decline in the jobless rate in 2021 and beyond.
Analysts expect an unemployment rate of 13.4% in the second quarter, 2.7 percentage points lower than the prior month’s poll, according to median estimates in a Bloomberg survey conducted from June 5 to June 10. While the fourth-quarter projection came down by 0.8 point to 9.5%, the forecast for the end of 2021 was just 0.4 point lower, at 7%.
What’s more, annual forecasts for gross domestic product barely budged: Economists estimate that the U.S. economy will contract 5.7% in 2020, then expand by 4% in 2021 and 2.8% in 2022.
The expectation for a gradual recovery dovetails with Federal Reserve Chair Jerome Powell’s assessment this week that the economy is in adeep hole, warranting strong monetary and fiscal support. One issue that may hold back a faster rebound is the prospect of fading stimulus from federal unemployment benefits and small-business loans.
“We’ll make progress because we are reopening, it will be quick and will look rapid, but it could come to a screeching halt in August and September when programs start to run out,” said Joel Naroff, president at Naroff Economics LLC.
The Bloomberg survey is roughly in line with Fed policy makers, who expect a jobless rate of 9.3% in the fourth quarter of 2020, followed by 6.5% in late 2021 and 5.5% at the end of 2022, according to medianprojections released Wednesday.
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