Major Banks Sounding The Alarm About The Economic Toll On America From Lockdowns

Written By BlabberBuzz | Sunday, 22 November 2020 05:45

JPMorgan has predicted that U.S. first-quarter growth will be negative because of the recent COVID-19 surge, warning - 'this winter will be grim.'

In a client note on Friday, the bank became the first Wall Street firm to break from the consensus view that GDP growth would continue to improve, citing rising cases across the country.

'This winter will be grim,' JPMorgan economists wrote, 'and we believe the economy will contract again.'

As businesses reopened this summer, the third quarter brought a record 33.1 percent annualized growth, but now JPMorgan expects GDP to slow to 2.8 percent in the fourth quarter and then shrink by 1 percent during the first three months of 2021.

'One thing that is unlikely to change between 2020 and 2021 is that the virus will continue to dominate the economic outlook,' JPMorgan economists wrote. 'Case counts in the latest wave are easily surpassing the March and July waves.'

The number of patients hospitalized with COVID-19 in the United States spiked nearly 50 percent just over the last two weeks, forcing states to impose new restrictions to curb the alarming viral spread.

79,000 people were being treated for the disease in hospitals across the country on Thursday, the most at any time during the pandemic. The country has been recording 161,607 new cases daily on a 7-day rolling average as of Wednesday.

The intensifying pandemic may already have slowed hiring and begun to curtail retail spending on the cusp of the holiday shopping season.

Instead of the 'tailwind' of growth provided as stores reopened over the summer, the United States 'now faces the headwind of increasing restrictions on activity. The holiday season - from Thanksgiving through New Year's - threatens a further increase in cases. This winter will be grim,' wrote the JPMorgan analysts.

In a rare federal response from the 'lame-duck' administration of President Donald Trump, the U.S. Centers for Disease Control and Prevention has urged Americans not to travel for next week's Thanksgiving holiday, which typically sees tens of millions on the move.

While some states are curbing restaurant hours or seating capacity, but not shuttering nonessential businesses, the surge still appears to have capped the U.S. economic rebound, according to high-frequency data tracked by economists for real-time evidence about the recovery.

Employment at a sample of mostly small businesses from time management firm Homebase declined for a fourth week, and shifts worked across different industries fell, according to time management firm UKG.

'The uncertainty that exists right now and has existed really since mid-summer is making it really hard for business owners to think about growth,' said David Gilbertson, UKG vice president for strategy and operations. 'We seem to take one step forward, and then one step back.'

The decline in shifts from mid-October to mid-November likely points to a weakening jobs report in November, he said.

That may remain the case until vaccines are rolled out to enough people to make a difference.

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