Economists from PNC expect worst slide since Depression

Economists at PNC Financial Services Group released their monthly economic forecast Friday, which shows the U.S. economy’s stunning free fall in March as the coronavirus pandemic took hold.

The Pittsburgh-based bank’s forecasters said the slide — which is expected to get “much, much worse” in the next few months — will be “the most severe U.S. economic downturn since the Great Depression.”

The contraction — being dubbed the Viral Recession — began in mid-March as states nationwide issued lockdown orders to help contain the spread of the virus, triggering the start of an avalanche of business closures and throwing millions of people out of work.

In the first quarter, the nation’s gross domestic product fell an estimated 4.8% on an annualized basis, but that figure is likely to be revised upward in coming months, PNC said. Overall, the bank expects the economy to contract by almost 10% on an annual basis in the first half of this year.

“To put this in perspective, the U.S. economy contracted by 4% during the Great Recession [2008-09] over a much longer period of time [six quarters],” PNC said.

The bank is forecasting job losses of around 20 million over the next few months, jacking up the unemployment rate to above 15% — its highest level since peaking at around 10% in 2009. (Unemployment peaked at about 25% during the Depression.)

On the positive side, the bank is projecting that a recovery will begin in the second half of 2020 — with annualized growth of better than 10% — “assuming restrictions on movement are gradually lifted over the next few months.”

The federal Paycheck Protection Program along with stimulus checks being sent to most U.S. households and expanded jobless benefits should allow consumers to resume spending when the economy opens again, PNC said.

Unemployment should drop below 10% by the end of this year, the forecasters said, and decline further to around 6% by the end of 2021.

Still, the bank cautioned that there were significant risks to a recovery, mainly a potential second coronavirus outbreak that could lead to renewed restrictions and a second recession.

PNC’s full economic report for April is available at www.pnc.com/neo.