Nearly 17 million people have filed new claims for unemployment in the last 3 weeks; this will exceed 20 million when the next report is released this coming week. That said, unemployment does not rise only due to layoffs, but also lack of hiring. How high will unemployment rise? More importantly, how quickly will it come back down when the pandemic eases? Here are links to various forecasts released recently:
Bloomberg survey of economists: unemployment rises to 12.6% and economic growth of -25% in Q2
WSJ survey of economists: unemployment rises to 12.6% in June, declines to only 9.7% in December; economic growth of -25.3% in Q2
Economist Intelligence Unit: economic growth of -40% (annualized rate) in Q2
JP Morgan (updated Apr 9): Unemployment reaches 20% in April, economic growth of -40% in Q2
Clearly, the short term is disastrous, with unemployment reaching post-Depression highs; going from a 50-year low to a 80-year high in less than 2 months.What will the recovery look like? Good question. The answer depends in part on the progression of the pandemic. There are indications that we may be reaching the peak of this phase, but concern about a second wave, either if social distancing ends too soon or later in the year. Also, how quickly will people and businesses seek to return to normal? Will people gradually return to small gatherings, but be hesitant to participate in large gatherings (100,000 people in a stadium watching college football this Fall?)? How many small businesses will be damaged enough such that they do not reopen?
It's too early to have confidence in a longer term forecast, but after a surge in unemployment in Q2, there is likely to be bounce when the economy "reopens" this summer (June? July? August?). Given that, unemployment should come down quickly, but remain quite high (8-10% by the end of the year. When will we return to 3.5% unemployment? Not in the next several years.
