The U.S. economy is losing steam as COVID-19 cases continue to spread across the country and Congress delays passing another coronavirus relief package to help millions of American workers and small business owners weather the storm.
JPMorgan Chase’s top economist, Michael Feroli, told clients last week the recent coronavirus surge and renewed restrictions to stop the spread would drive up layoffs and shrink economic activity in the first three months of 2021 by some $50 billion. That translates into an annualized drop in gross domestic product — the total value of products and services in the U.S. — of about 1%. It also would impede an ongoing recovery from pandemic lockdowns in the spring that rebounded rapidly between July and September with businesses reopening but which now appears to be slowing.
“If the virus weighs on activity and leads to business closures — temporary or otherwise — we think that related layoffs would show up,” Feroli said in the JPMorgan Chase report. “The resurgence of COVID-19 appears to have already weighed on [consumer] sentiment . . . and we think the virus could have increasingly negative effects.”
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JPMorgan Chase, the largest bank in the U.S., isn’t alone in warning of a double dip. In recent weeks, the economic forecasting arms of two large credit-rating agencies, Moody’s and S&P Global, have both sounded the alarm.
Mark Zandi, chief economist of Moody’s Analytics, told CBS MoneyWatch he expects the economy to shrink at an annual rate of 1.5% — the equivalent of a $25 billion drop in national income per month — in the first quarter next year.
Despite such concerns, many economists do not expect the U.S. to tumble back into a recession. And of course, the Dow Jones Industrial Average topped 30,000 for the first time on Tuesday, a sign of investor optimism that can add wind in the sails of the broader economy.