COVID-19 has taken a historic toll on the U.S. economy. Since mid-March, 33 million workers have filed for unemployment benefits and the unemployment rate is nearly 15%. Although many employers have furloughed workers until social distancing measures and state lock-downs end, it is likely some of these temporary cuts will become permanent as demand for some industries, such as travel and hospitality, is severely restrained for the foreseeable future. The U.S. economy is expected to end the year nearly 4% below 2019 levels.
The timing of the recovery will depend upon the willingness of consumers to spend as social distancing measures are lifted. Some high-frequency indicators suggest activity has bottomed, especially in states that have eased restrictions on commerce. Thus, we expect the economy to return to growth in the second half of 2020, as aggressive stimulus policies and pent-up demand gain traction.
Key risks to the outlook include future waves of COVID-19 infections, both domestically and among key trading partners, that would restrain commerce. If future COVID-19 transmissions can be controlled, we expect economic growth will hit 6% in 2021. A downside scenario, which assumes more severe viral flare-ups, suggests economic growth of just below 4% in 2021.