SAN FRANCISCO (Reuters) - The U.S. economy could shrink 14% next quarter, a JP Morgan economist said on Wednesday, one of the most dire calls yet on the potential hit to the United States from the coronavirus epidemic.
A drop of that size would be steeper than in the fourth quarter of 2008 - the worst of the Great Recession - when the economy shrank 8.4%.
That is assuming the Federal Reserve will continue to find “creative” ways to support the economy and that the Trump administration and Congress deliver $1 trillion in fiscal support, according to the bank’s U.S. chief economist, Michael Feroli.
Other analysts are also forecasting downturns in the United States and across the globe, as authorities restrict movement and public outings to essentials only in a bid to safeguard public health. In the United States, the ripple effects of rapidly shuttering restaurants, shops and businesses are putting millions of jobs at risk.
“The United States, Europe, and Japan are headed for recession,” IHS Markit said on Wednesday, forecasting world real GDP to grow just 0.7% this year, and the U.S. economy to shrink by 0.2%.
The JP Morgan view has the U.S. economy shrinking 1.5% for the full year, and unemployment, now at a 50-year low of 3.5%, rising to 6.25% by the middle of the year before easing to about 5.25% by year end as economic growth restarts.
Reporting by Ann Saphir in San Francisco; Editing by Matthew Lewis and Peter Cooney