US business economists see coronavirus as biggest risk

WASHINGTON (AP) — The United States (US) economy faces risks from a potential resurgence of the coronavirus and from the failure so far of Congress to provide additional financial support for struggling individuals and businesses.

That judgement emerges from a survey released yesterday by the National Association for Business Economics (NABE) of 52 forecasters who were polled last month. Among the forecasters, 55 per cent said they regarded a second wave of COVID-19 cases as the most serious threat. Twenty per cent said they thought a lack of further government economic aid would pose the biggest risk.

The inability of Democrats and Republicans to forge a compromise has meant that unemployed Americans are no longer receiving a federal unemployment benefit. Support for small businesses has also expired.

Similar to many other economists, the NABE’s forecasters have estimated that the economy, as measured by the gross domestic product (GDP), grew at a 25 per cent annual rate in the just-ended July-September quarter. That would be the largest quarterly gain on records dating to 1947. But it would follow an even bigger contraction in the April-June quarter, when the coronavirus paralysed much of the economy. For the current October-December quarter, the NABE panel foresees a 4.9 per cent annual growth rate.

The recovery from the pandemic recession, in the view of the forecasters, will remain sluggish in coming months. A majority of them do not expect GDP to return to its pre-pandemic levels until sometime in 2022.

Two women and a child at a mobile testing site at the Charles Drew University of Medicine and Science in Los Angeles, the United States. PHOTO: AP

For all of 2020, the panel expects GDP to decline 4.3 per cent.

That would be the economy’s first full-year contraction since a 2.5 per cent fall in 2009 at the end of the Great Recession. For 2021, the forecasters expect growth of 3.6 per cent.

“NABE panellists have become more optimistic, on balance, but remain concerned about a potential second-wave of COVID-19,” noted Eugenio Aleman, an economist at Wells Fargo Bank and the chair of the NABE survey panel.

On the danger that the economy might suffer a double-dip recession, in which GDP would shrink again, 51 per cent of the forecasters estimate the chances at 20 per cent or less. Only 12 per cent see the likelihood at 50 per cent or more.

Over half the panellists believe that 10 per cent to 20 per cent of the jobs that have been lost to the pandemic recession are permanently gone, with many hotels, restaurants, retailers and entertainment venues unable to re-open.

Last Friday, the government reported that the nation added 661,000 jobs in September, the third straight monthly slowdown in hiring.

The economy has recovered only slightly over half the 22 million jobs that were wiped out by the viral pandemic. The unemployment rate did decline to 7.9 per cent from 8.4 per cent in August.

The jobless rate had peaked this year at 14.7 per cent in April.