While many experts and economists have asserted that the US economy was on a steady decline towards a recession in spite of the government’s strategies to stimulate the economy, Bank of America says that the economy has already fallen into a recession. After the key indicators signaled an economic decline for the second time this week.
In a Thursday note, the Bank of America stated that the US has already entered a recession and the US GDP will fall by 12% in the second quarter on a seasonally adjusted annual rate basis. This fall would make it the worst decline since the post-war economic decline. Though there might be some hope “if there is a targeted and aggressive policy response to offset the loss of economic activity and ensure a sound financial system,” the note carried.
“We believe that the US economy has fallen into recession, joining the rest of the world, and it is a deep plunge,” the Bank of America economists team leader, Michelle Meyer wrote. Supporting the Bank of America’s recession note, the UCLA Anderson group also announced that the US economy wasn’t growing anymore and will most likely remain in a recession until the end of September.
In addition to the 12% decline forecast, the economists are also forecasting a 0.8% contraction for 2020 judging from the first quarter’s 0.5% growth and the slow growth hitting the second quarter. Though, the bank is positive that the economy would once again grow in third-quarter while the speed at which the second quarter would grow is dependent on the policy response.
As the coronavirus pandemic continues to spread, all sectors of the economy and financial markets have plunged, bringing the longest bull market season to a sharp end. Bank of America believes that the US economy is already in a recession as industry watchers are all warning of the possibility of severe damage to the US economy as consumer activity continues to slow down due to fear of the coronavirus pandemic.
Regarding unemployment rate in this season, Bank of America is positive that nearly 3.5 million jobs will be lost starting with a 1 million hit per month in the second quarter. If this happens as expected unemployment rate will nearly hit 6.3%. The most affected industries will likely be the industries that have the highest numbers of workers who work hourly such as retail, leisure, and hospitality.
Bank of America will continue to watch its indicators to track the economy. Its key indicators are Opentable reservations, traffic, school closures, manufacturing survey, transit data, early labor market, and their own consumer data.