Business economists have grown dramatically more pessimistic about their outlook for the U.S. economy because of the COVID-19 pandemic and accompanying lockdowns of businesses, schools and almost all other nonessential activities.
The latest Business Conditions Survey released by the National Association for Business Economics is the weakest since the financial crisis more than a decade ago.
Eighty-six percent of the roughly 107 economists surveyed from April 13 to April 16 expect U.S. GDP, adjusted for inflation, will decline 2% over the coming year. Even the 14% who expect some positive growth through the end of 2020 anticipate growth of 1% or less.
“The outlook for inflation-adjusted gross domestic product (real GDP) in 2020 reversed sharply,” said NABE President Constance Hunter in a statement, referring to the last comparable NABE survey based on responses in late December and early January, before the COVID-19 pandemic hit the U.S.
”Respondents report that last quarter was the worst since the global financial crisis for sales, profit margins, prices and capital spending,” added NABE Business Conditions Survey Chair Megan Greene, who is also a senior fellow at the Harvard Kennedy School.
Their expectations for sales, profit margins and capital spending were the weakest in a decade.
The latest survey included multiple questions about the impact of the COVID-19 pandemic on their companies operations, jobs, cash flow and outlooks. The responses were bleak:
- 63% respondents said their firms have imposed a hiring freeze
- Roughly one-third reported their firms had shut down operations in whole or in part and furloughed employees
- 20% reported their companies had cut wages and 17% laid off workers
- 74% said their outlook for the next three months is “worse,” but that figure topped 80% for all major industry categories, including FIRE (finance, insurance and real estate)
- More than 50% expect the unemployment rate will be 8% or higher a year from now
On a slightly more positive note, three-quarters of respondents said their companies had enough cash on hand to “stay afloat” for longer than six months without federal assistance and 46% of respondents said their firms had not applied for any such assistance. Twenty-three percent didn’t know whether their firms had applied for assistance and 22% said they did.
Sixty-seven percent of respondents expect their firms will resume normal operations within weeks or months.That includes the 28% who anticipate a return to normal operations within three to six months. Thirty-five percent expect the pandemic will lead their firms to have more geographically flexible hiring and working arrangements.
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