Published in Economic Development

Comerica outlook anticipates faster economic rebound than previous forecasts

BY Monday, June 08, 2020 02:26pm

Comerica Inc. economists now expect a stronger rebound than previously forecast for the U.S. economy in the latter half of 2020.

After a projected 30.6-percent decline in Real GDP for the second quarter during the depths of the economic effects from the COVID-19 pandemic, the U.S. economy could grow by 22 percent in the third quarter and 9 percent in the fourth, according to an updated outlook Comerica issued today.

The June outlook takes a more optimistic view than Comerica’s previous economic forecast a month ago that predicted the U.S. economy would take 13 quarters to return to its pre-COVID Real GDP. Now Comerica expects that a return to the peak Real GDP from the fourth quarter of 2019 will take eight quarters to achieve.

“For now, we will risk feeling a little more positive,” Comerica economists wrote in the outlook that notes despite the higher level of optimism, “the amount of uncertainty around any particular economic forecast is huge right now.”

Economists noted that although many states are reopening and that “some businesses are coming back to life, many are still struggling. Employees are coming back to work as others are getting furloughed.” A second wave of COVID-19 and a return to “strict social mitigation policies later this year …. would be a change in course for the economy.”

“We expect data to look better through June as states reopen their economies. However, we remain mindful of the ongoing second-order effects of the shutdowns. We are not out of the woods yet,” according to the outlook. “Beyond economics, the trajectory of the coronavirus through the U.S. and elsewhere is an ongoing concern.”

Comerica projects Real GDP for all of 2020 to come in at minus-4.2 percent, followed by 4.1 percent growth in 2021. 

However, unemployment nationally will remain high, peaking at 12.6 percent for the second quarter of 2020 and ending the year at 12.1 percent for the fourth, according to Comerica’s outlook. Unemployment will dip to 11.4 percent in the first quarter of 2021 and ease slightly to 10.9 percent for the third quarter next year.

Comerica expects that the large net jobs gain reported last week for June that reflects states easing stay-home order will “mask large ongoing job losses in some industries.” Not all of the people who lost their jobs or were furloughed because of the economic fallout from the pandemic will get their jobs back, economists wrote. The rehiring of furloughed workers will occur at a rate less than a one-to-one ratio.

“The assumption of a 75 percent rehire rate seems reasonable. Some businesses will not reopen. Some will reopen with reduced output. Some will choose to operate with fewer employees. Some employees will be slow to go back to work due to enhanced unemployment benefits,” Comerica economists wrote in today’s outlook. “Some businesses will reduce payrolls after PPP loan restrictions expire. State and local governments may lay off a huge number of employees without relief from Washington.”

Comerica projects U.S. auto sales to fall from 17 million units in 2019 to 14.7 million units this year, then rebound to 16.3 million in 2021.

In another U.S. outlook that came out today as well, the National Association of Business Economics expects the inflation-adjusted GDP for the U.S. will decline 5.6 percent from the fourth quarter of 2019 to the fourth quarter of 2020. The largest quarterly decline, 33.5 percent, will come in the second quarter, according to the results of a survey with NABE member economists.

Nearly nine out of 10 NABE survey respondents viewed a second wave of the COVID-19 pandemic as the greater risk to the U.S. economy. 

The private, nonprofit National Bureau of Economic Research said today that it concluded the U.S. economy went into recession in February, ending a record 128-month economic expansion that began in June 2009. The prior record was 120 months from March 1991 to March 2001.

The NBER’s Business Cycle Dating Committee determined that the economy peaked in the fourth quarter of 2009, “plateaued from December 2019 through February 2020, and then fell steeply from February to March” as the pandemic took hold in the U.S.

Read 1622 times Last modified on Monday, 08 June 2020 16:11
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