“It was late to acknowledge the threat posed by the virus, and then ultimately ceded the bulk of the crisis management to state governments, which led to a patchwork response that was slow to get going,” Mark Zandi, chief economist of Moody’s Analytics, said in an analysis.
Based on the relationship between confirmed COVID-19 infections and unemployment rates across countries, Zandi noted that every 1,000 more infections per million inhabitants has resulted in an approximately 1-percentage point increase in the unemployment rate.
“This suggests that if the U.S. had simply experienced an infection rate consistent with the average country, the U.S. unemployment rate would have been nearly 3 percentage points lower in April,” he said.
U.S. employers cut a staggering 20.5 million jobs in April, which erased a decade of job gains since the global financial crisis and pushed unemployment rate to a record 14.7 percent, the Labor Department reported last month.
The real unemployment rate was closer to 20 percent in April after accounting for a misclassification error acknowledged by the Bureau of Labor Statistics that inappropriately counted millions of unemployed people as actually employed, according to Zandi.
Zandi expected U.S. unemployment to decline from 20 percent to nearer to 10 percent as businesses reopen, but “it is difficult to see doing much better than that until there is a vaccine.”
“Many of the millions of jobs lost in brick-and-mortar retailing, leisure and hospitality, restaurants, the transportation industry, and the performing arts won’t come back any time soon and may be lost forever,” he said.
Zandi believed that the COVID-19 recession is over only if there isn’t a serious second wave of the virus that disrupts businesses again, and Congress and the Trump administration come to terms on a fourth fiscal rescue package before Labor Day.
“Even if we are fortunate enough to avoid a serious second wave and smart enough to provide more fiscal support, the economy isn’t going anywhere fast until there is a widely distributed and adopted vaccine,” he said.
The United States Commerce Department reported on Thursday that economic activity in the first quarter contracted at an annual rate of 5 percent in a second estimate, 0.2 percentage point lower than the advance estimate.
That downwardly revised figure, however, still does not fully capture COVID-19‘s economic damage, and many analysts believe that the decline in the second quarter is expected to be much deeper.
Fallout from the COVID-19 pandemic will shrink the size of the United States economy by 7.9 trillion U.S. dollars over the next decade, according to new projections released by the Congressional Budget Office on Monday.