Severe Downfall

By Isaac Cohen*

The term “severe downfall” was used by Federal Reserve Chairman Jerome Powell, last week, to describe the consequences of the “abrupt halt,” in several sectors of economic activity, decreed to deal with the “public health crisis” caused by the spread of the coronavirus. At the usual press conference, after the last meeting of the Federal Open Market Committee, Chair Powell mentioned the millions unemployed, which based on the number of jobless claims now exceeds 30 million workers, or 12.4 percent of the workforce. He also said plummeting household spending, by 7.5 percent, almost paralyzed sectors such as air transportation, hospitality and entertainment, also retail and even manufacturing output, all of them in abrupt decline by the end of this year’s first quarter.

Overall economic activity in the United States, during the last quarter, decreased -4.8 percent and during the second quarter it is projected to fall even more. On May 1, the GDPNow model from the Federal Reserve Bank of Atlanta estimated real GDP growth, during the second quarter of 2020, will fall -16.6 percent.

The April unemployment figure, to be released this coming Friday by the Labor Department, is projected to be around the 20 percent prediction made by Treasury Secretary Steven Mnuchin during negotiations with Congress.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, TELEMUNDO and UNVISION and other media.

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