The congressional budget office (CBO) put out a report today on the impacts of coronavirus to the economy and it is bleak. Perhaps the most jarring nugget is they think the country could have a 9% unemployment rate at the end of 2021.
Here are the lowlights:
- The CBO expects GDP to contract 7% in the second quarter — this equates to an annualized decline of 28%.
- The unemployment rate will exceed 10% in second quarter.
- The 10-year Treasury rate will remain below 1%.
The CBO notes several times that it’s difficult to project into the future because there are so many variables, such as how long social distancing is in place. However, this paragraph, explaining in part how they built their model, is grim no matter how you shake it:
CBO’s projections also included the possibility of later outbreaks of the virus. To account for that possibility, social distancing was projected to diminish by only three-quarters, on average, during the second half of the year. And CBO expected the effects of job losses and business closures to be felt for some time; the unemployment rate underlying the cost estimate was 9 percent at the end of 2021.