The US unemployment rate would shoot past 10 percent in the second quarter and GDP growth rate would decline by more than 7 percent as the COVID-19 crisis grips the US economy, according to projections released by the Congressional Budget Office (CBO) on Thursday.
Interest rates on 10-year US Treasuries are forecast to be below 1 percent during the quarter, said the office, which provides nonpartisan economic analysis to the US Congress.
On Thursday the yield on the benchmark US 10-year Treasury note hovered at 0.62 percent.
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The CBO said that its projections were based on information available through Friday last week and that it is working on new estimates factoring in more recent information on the crisis, which “has been more negative than anticipated.”
It said it included the possibility of later coronavirus outbreaks and a slow drop-off of social distancing in its projections, and expected an unemployment rate of 9 percent at the end of next year.
In recent weeks US lawmakers have raced to pass bills that would quell the public health emergency and economic turmoil unleashed by the coronavirus epidemic.
They are negotiating with US President Donald Trump’s administration to draft a fourth legislative package aimed at boosting the economy.
US House of Representatives Speaker Nancy Pelosi on Thursday said that she would form a bipartisan select committee to oversee the spending of the more than US$2 trillion Congress has already approved to respond to the pandemic.
The CBO said it would incorporate the effects of the legislation in projections to be published later this year.
US Federal Reserve Bank of Cleveland President Loretta Mester said that US unemployment could rise as high as 15 percent as the nation forcibly shuts down important parts of its economy to help contain the pandemic.
About 10 million Americans lost their jobs over the past two weeks, based on initial jobless claims reported on Thursday — far exceeding forecasts.
The numbers mean unemployment might already be approaching 10 percent, nearly matching its peak following the financial crisis of 2008-2009, as fallout from the contagion ravages the labor market.
“I was anticipating that in the first half of the year we were going to have some really bad numbers, and seeing that number today just confirms how bad it is,” Mester said in a telephone interview with Bloomberg News.
“You don’t like to see those numbers because it means people really are impacted by this,” she said. “It will take some time to get it back down, and we’ll see a big hit to output growth in the second quarter because we’ve shut the economy down.”
The US central bank is racing to prepare additional emergency programs, on top of the six it has already announced. One, the Main Street Lending Program, will aim to deliver loans to small and medium-sized businesses.
Boston Fed President Eric Rosengren on Wednesday said that facility would not be ready for “another couple weeks.”
Mester said that she could not provide any more information on the timing or details of the program.
“People and businesses need aid now,” she said. “I can tell you we understand the sense of urgency and the Fed is working as quickly as possible.”
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