CBO: Third Quarter Could be a Boom, but Future Economic Activity More Uncertain Than Ever
Article from For Liberty by Norm Leahy.
The Congressional Budget Office is out with a revised forecast for the U.S. economy over the next decade, with expectations that the economy will “grow rapidly in the third quarter of this year.” But growth beyond that will be slower and lower than in previous periods of recovery.
In the short term:
CBO projects that if current laws governing federal taxes and spending generally remain in place, the economy will grow rapidly during the third quarter of this year.
- Real (inflation-adjusted) gross domestic product (GDP) is expected to grow at a 12.4 percent annual rate in the second half of 2020 and to recover to its pre-pandemic level by the middle of 2022.
- The unemployment rate is projected to peak at over 14 percent in the third quarter of this year and then to fall quickly as output increases in the second half of 2020 and throughout 2021.
Over the longer term:
Following that initial rapid recovery, the economy continues to expand in CBO’s projections, but it does so at a more moderate rate that is similar to the pace of expansion over the past decade:
- By 2028, real GDP reaches its long-run level relative to potential GDP (the maximum sustainable output of the economy) and grows at the same rate as potential GDP thereafter.
- The unemployment rate remains above its pre-pandemic level through the end of the projection period.
- Interest rates on federal borrowing throughout the decade remain well below the average rates in recent decades
That’s the forecast and, like any guess about the future, it’s subject to change.
In this case, potentially a great deal of change. The CBO cautions that there is an “unusually high degree of uncertainty” in these forecasts and its current outlook for the next decade “has deteriorated significantly” since its last report in January.
Image Credit: By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons