Congressional Report Predicts Tough Economic Times For The Next 10 Years

( There is hope that eventually once the coronavirus pandemic slows considerably, the economy will bounce back quickly.

The thinking is that as businesses are allowed to re-open and people become comfortable frequenting them again, companies will re-hire workers, which will lead to an uptick in economic activity. There’s some validity to that thinking, too.

If you look at both the May and June jobs reports, you’ll see that workers were beginning to be re-hired in states that began to ease coronavirus-related restrictions. June’s report showed 4.8 million jobs were added, which was a record. That pushed the unemployment rate down to 11.1%.

Since February, though, the U.S. economy has still lost 14.7 million jobs since February. And with outbreaks spiking in large parts of the county’s South and West, the optimistic timeline for a complete economic bounce back was pushed back some.

But according to a 10-year forecast published Thursday by the Congressional Budget Office, times could be tough for close to a decade.

The CBO predicts that the average unemployment rate over the next 10 years will be 6.1%, nearly double that of the unemployment of 3.5% that was seen before the pandemic. In addition, the CBO warned that their forecast has a lot of uncertainty because of the ever-changing virus as well as policy responses to it and consumer behavior.

According to the report, the U.S. gross domestic product is forecast to be 3.4% lower on average over the next 10 years than what it originally predicted back in January — before the coronavirus pandemic took hold in the U.S. The CBO predicts it won’t be until 2028 that the GDP will once again grow in line with long-term trend growth.

In addition, the CBO report says the recession could increase the federal budget deficit this year by a whopping four times what it currently is. The total deficit could top out at $3.7 trillion.

To combat this downturn in the short term, the Federal Reserve is expected to keep interest rates very low for the foreseeable future. The hope is to spur economic activity through cheap borrowing.

The CBO’s projection forecasts the unemployment rate peaking in the third quarter of this year. That’s likely when the full effects of the current spike in coronavirus around the country, plus the predicted “second wave” in the fall, are likely to be felt. After that point, though, the CBO says unemployment should fall rapidly for the rest of 2020 and continue throughout 2021.

What states do to contain the virus’ spread in the next few months will be crucial for both the short- and long-term health of the U.S. economy. Many states are either re-instituting coronavirus restrictions or are pausing re-opening plans as the result of spikes in infections.

While those moves are sure to have a negative impact on the economy in the very near term, containing the virus’ spread quickly could allow the states to begin re-opening again later this year.

If the virus continues to spiral out of control, it’s possible that even the CBO’s dire predictions could be wrong — and we could be in for a much more grim situation.