The Congressional Budget Office has just released a devastating outlook for the U.S. economy this year.
GDP, adjusted for inflation, is expected to decline 5.6% for the calendar year, on a fourth-quarter to fourth-quarter basis, its biggest drop since 1946.
Second-quarter GDP — the weakest quarter — is forecast to contract at an annualized rate of almost 40% in the second quarter, which is even weaker than many, though not all, Wall Street economists’ projections.
The CBO expects the unemployment rate to surge to 14% in the second quarter and remain elevated for the rest of the year — 15% in the third quarter and 11% in the fourth.
The unemployment rates reflect the projected loss of nearly 27 million people employed in the second and third quarters and the exit of roughly 8 million people from the labor force.
The labor force participation rate, which is the percentage of people in the civilian population who are at least 16 years old and working or seeking work, is projected to decline from 63.2% in the first quarter of this year to 59.8% in the third quarter.
The contraction in the economy coupled with the government’s fiscal response is expected to swell the federal budget deficit for the fiscal year, which ends Sept. 30, to $3.7 trillion, this fiscal year, falling to $2.1 trillion in fiscal 2021.
The total federal debt load is expected to top the total economic output in the U.S. for this year, jumping to 101% of GDP, just slightly below the 106% ratio reached in 1946 after World War II.