The Covid-19 outbreak and subsequent blockade have halted the economy, and while states are slowly reopening, it will be a difficult next decade as the country recovers from this recession, according to the CBO.
On top of that, the forecast is fraught with uncertainty in terms of the virus itself, changes in consumer behavior and policy responses, the CBO warned.
The CBO now forecasts that the unemployment rate will remain above its pre-pandemic level, which was a nearly 50-year low of 3.5%, until after 2030, the end of the current forecast range, the CBO predicts. The 10-year average unemployment rate will be 6.1%, above the 4.2% projected in January.
Meanwhile, the US real gross domestic product, the broadest measure of the economy, will average 3.4% lower in the next decade than originally predicted in January. It will take until 2028 until GDP grows again in line with the long-term growth trend.
And that’s not all: This recession could nearly quadruple the federal budget deficit this year, bringing it to a whopping $ 3.7 trillion, according to April projections.
Interest rates are expected to remain low for the foreseeable future, the Federal Reserve and CBO say, to encourage economic activity.
But it remains to be seen if the worst is over. The CBO projects that the unemployment rate will peak in the third quarter before falling rapidly in the rest of 2020 and throughout 2021.
So far, unemployment peaked in April at a rate of 14.7%. More than 20 million jobs disappeared that month. But since then, the United States has seen a record number of jobs resurface as the economy reopens.
The Bureau of Labor Statistics reported earlier Thursday that a record 4.8 million jobs were added in June, bringing the unemployment rate to 11.1%. However, the economy continues to drop 14.7 million jobs since February.
Still, with concerns about rising Covid-19 infection rates in some parts of the country, some states are suspending its reopening. For laid-off people, that means more time out of the job market.
