GDP shrinking 5.6% this year, pre-pandemic levels not expected until mid-2021


US gross domestic product will shrink 5.6% between the fourth quarter of 2019 and the fourth quarter of this year, according to the median forecast in the “Outlook Survey” report released today by the National Association for Business Economics.

The biggest decrease in GDP is believed to be happening in this quarter — the second quarter — with the median forecast being a 33.5% annualized decline in GDP quarter over quarter.

A majority of NABE economist in the survey, 89%, believe US real GDP will not return to levels seen before Covid-19 until at least the second half of 2021.

They expect the average unemployment rate this year to be 10.9% — the highest annual average since the inception of the data in 1948. However, they expect average monthly job growth in 2021 to be 497,000.

Possible downside risks? The survey found 87% of respondents believe a second wave of Covid-19 is the biggest downside risk through 2020.

Turning to upside risk, 51% of panelists believe that a vaccine is the greatest upside risk for 2020, while 29% of respondents believe that the greatest upside risk is a “test and trace policy” that would slow the Covid-19 outbreak and allow a broader reopening of the economy.

NABE’s survey contains the consensus forecast by a panel of 48 professional forecasters. It was taken between May 14 and May 26.