Key Highlights
- With Department of Labor showing 3.28M filing for unemployment benefits March 21, Goldman Sachs predicts unemployment rate to hit record 15% this year
- Earlier in March, economists were predicting a 9% unemployment rate
Goldman Sachs, a multinational investment bank and financial services company, is now predicting an unemployment rate of 15% this year. This forecast is predicated on March 21’s unprecedented spike in unemployment benefit applications of 3.28M as well as the fact that Q1 2020 was the worst quarter on Wall Street since the 2008 financial crisis.
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Economists with Goldman Sachs wrote, “These forecast changes reflect the net effect of two directionally offsetting changes. On the one hand, the anecdotal evidence and the sky-high jobless claims numbers show an even bigger output and (especially) labor market collapse than we had anticipated. This not only means deeper negatives in the very near term but also raises the specter of more adverse second-round effects on income and spending a bit further down the road.”
Such predictions from Goldman Sachs are mild compared to those of the Federal Reserve Bank of St. Louis President James Bullard who told BloombergNews that unemployment could hit as high as 37% this year.
The good news is that both Bullard and economists with Goldman suggest the “current climate” ought to be relatively short lived. Both see the steps taken by the central bank (buying “what it takes” regarding mortgage-backed securities) and the federal government (the CARES Act relief package)) as being positive and as easing both monetary and fiscal policies that will likely “contain these second-round effects and add to growth down the road.”
Goldman’s economists wrote, “While uncertainty is substantial, we expect the lockdowns and social distancing to result in sharply lower new (COVID-19) infections over the next month, and our baseline is that slower virus spread and adaptation by businesses and individuals should set the stage for a gradual recovery in output starting in May/June.”
Thanks to HousingWire’s Ben Lane.
Also read: Agents: How-To-Apply For Unemployment, Real Estate Stocks Slammed by Coronavirus Stock Market Fears, Coronavirus Now Reality in Real Estate Dealings
