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The economic consequence of COVID-19 was initially seen as just a downturn. Then, a modest recession. Now, it looms as the worst economic shock the US has faced since the Great Depression, Elliot Clarke, a Senior Economist at Westpac reports. 

Key quotes

“The unemployment rate is likely to be closer to 12.0% than 10.0% in April. Further on, the peak unemployment rate for this cycle could easily be between 15.0% and 20.0%.”

“We look for growth to only bounce back by 1.0% in 2021 (year–average). Note, the timing of the recovery is an issue here. Growth over the year to December 2021 will be much stronger at around 5.0%.”

“It is important to highlight also that the risks to this view are skewed squarely to the downside. This is primarily because of the virus’ capacity to inflict damage, but also the inability of the FOMC to go beyond its current policy settings to stimulate demand.”