An updated economic outlook from the University of Michigan projects a partial recovery for the U.S. in the second half of the year that would follow a deep drop in the second quarter caused by the COVID-19 pandemic.
The outlook issued Thursday afternoon projects a 25 percent annualized decline in Real GDP for the U.S. economy from April to June. That would follow an estimated Real GDP decline of 7 percent for the first quarter that just ended.
Unemployment nationally will rise to 14 percent for the second quarter and peak at 16 percent in May, according to the University of Michigan.
“It will take several months to get an accurate picture of the economic damage caused by the pandemic. Nonetheless, the dramatic events of the past several weeks and the decisions taken during this time are likely to shape the economy and society for the next decade or longer,” University of Michigan economists wrote in the updated outlook, noting that 42 states have state-at-home orders.
Michigan Gov. Gretchen Whitmer on Thursday extended the state’s order to the end of April.
The economic projections for Michigan are even worse, predicting a second quarter unemployment rate for the state of 23 percent, with payroll employment falling by nearly 1.2 million jobs.
“For comparison, Michigan lost about 140,000 jobs in the first quarter of 2009, during the depths of the Great Recession,” according to the outlook. “The jump in Michigan’s unemployment rate we are forecasting is larger than for the nation as a whole, reflecting the traditionally more cyclical nature of the state’s economy.”
Light vehicle sales will fall by about half from the first quarter to the second quarter to an annualized rate of 7.67 million units, down from 15.01 million units in the first three months of 2020, and end up at 13.5 million units for the year.
The updated outlook presumes that “new COVID-19 cases will taper off quickly by late May or early June” and the pandemic will “improve sufficiently for the economy to begin reopening in early June, and that future outbreaks of the disease will not cause similarly widespread disruptions to economic activity going forward,” University of Michigan economists wrote.
The $2.2 trillion economic package Congress passed “will help to cushion households and businesses from the economic downturn in the second quarter,” as will any further action by the federal government, which University of Michigan economists called “imperative.”
“We believe that more assistance will be needed, especially for small businesses and state and local governments, but the aggressive federal response to the pandemic maintains the possibility of a vigorous recovery when public health conditions allow the economy to begin reopening,” University of Michigan economist wrote.
They project U.S. Real GDP growth “to rebound partially” at 3.5 percent in the third quarter, although “the next surge in growth will have to wait until mid-2021, after a vaccine becomes widely available. Unemployment could decline to 7 percent by the end of 2020.”
University of Michigan economists expect Michigan’s unemployment rate could fall to 9 percent in the third quarter and “to decline more slowly after that, to between 5 and 6 percent by the end of our forecast horizon in the fourth quarter of 2022.”
Michigan as of Thursday had 21,504 confirmed COVID-19 cases and 1,076 deaths. That’s a single-day increase of 1,158 cases and 117 deaths from Wednesday.