The US economy is going to crash by an unprecedented 30 per cent in the second quarter (April to June) as Americans have been forced to shutter down their business and stay home to stem the spread of coronavirus, the Washington Post reported citing high-level treasury and Federal Reserve officials.
This slump, which even overtakes the crash of the Great Depression of the 1920s, is going to cause terrible economic dislocation in the world's largest economy. It will take years for things to get better.
The US economy suffered its sharpest decline since the Great Recession -- a 4.8 per cent drop -- from January through March. Head of US Fed Reserve Jerome H Powell has indicated that the second quarter will be even uglier as many Americans continue to stay home.
More than 26 millions American have already lost their jobs and had to seek unemployment aid. The Post reported that those numbers are expected to rise on Thursday with a new round of jobless claims. He called it 'heartbreaking' to witness millions of job losses.
"We are going to see economic data for the second quarter that's worse than any data we've seen for the economy," Powell said.
Powell said recovery from the current crisis could take a while and that there is a significant risk of long-term damage if the Congress and the central bank do not do enough to aid the economy.
Many businesses are on the verge of collapse since they do not have enough money to sustain weeks without revenue and customers. One of the biggest concerns for business owners is whether customers will come back quickly once governors and mayors say it is all right to reopen or whether shoppers will be fearful to venture out.
Analysts say the second quarter is likely to show a decline of more than 30 per cent -- a level not seen since the Great Depression
"This is a Depression-like shock," said Joseph Brusuelas, Chief Economist at audit firm RSM. "Policymakers should be prepared to support other rounds of aid and stimulus for an economy that is going to be reeling for some time."
"There's really no question about it. We are in a recession, and it's going to be a sharp recession," said economist Alicia Modestino, Associate Director of the Dukakis Centre for Urban and Regional Policy.
Kathy Bostjancic, Chief US financial economist at Oxford Economics, is of the view that a late reaction from Congress and the administration led to the unfolding crisis.
"There was a late reaction from Congress and the administration to the unfolding crisis. Powell sized up very quickly that the Fed needed to provide support."
Citing that it took a decade to recover from the Great Depression, experts suggested that the government have to work on a war footing in order to help Americans to climb out of the crisis.
Nobel Prize-winning economist Paul Romer has urging the US government to spend USD 100 billion to test nearly everyone in the nation to put people at ease that the virus is under control and that it is truly safe to reemerge. But so far, only about 2 percent of the nation has been tested.
"It's totally in our control to fix this," Romer said. "We should be spending USD100 billion on the testing. We should just get it going. It's just not that hard."