The CBO said the majority of the loss was caused by the sharp contraction in economic activity this year, which it had not predicted in its last 10-year report, published in January.
CBO director Phillip Swagel wrote in response to an inquiry from Senate Minority Leader Charles Schumer: “Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce US investment in the energy sector.”
“Recent legislation will, in CBO’s assessment, partially mitigate the deterioration in economic conditions,” he added.
Since the virus pandemic hit the US the government and the Fed have provided trillions of dollars of support for the world’s biggest economy.
Still, unemployment has soared to levels not seen since the Great Depression of the 1930s as more than 40 million Americans have already been put out of work.
The US unemployment rate hit 14.7% in April and on June 5 the Labor Department is expected to confirm that it reached 20% in May. In March that figure stood at just 4.4% having risen from a 50-year low from the month before.
There is an ongoing debate in the Congress over a new $3 trillion a new stimulus plan as well as a proposal to renew several federal aid programs that would otherwise lapse, including a temporary increase to jobless benefits that is set to expire in July.
The number of US unemployment claims has hit 33.3 million since mid-March amid coronavirus lockdown, about 20% of the US workforce.
A further 3.2 million Americans sought unemployment benefits last week as the economic toll from the coronavirus pandemic continued to mount.
The number of new claims reported each week by the Department of Labor has subsided since hitting a peak of 6.9 million in March.
However, they remain extraordinarily high.
The number of Americans collecting benefits has continued to rise, despite recent moves to start re-opening in some parts of the country.
Companies such as Lyft, Uber and Airbnb are amongst the companies that have announced cuts in recent weeks, as shutdowns halted significant amounts of travel.
The impact has been felt across the economy, affecting medical practices, restaurants and administrative workers among many others.
Economists say the monthly unemployment rate for April, which will be released on May 8, is likely to reach 15% or higher.
Just two months ago, the unemployment rate was at 3.5%, a 50-year low.
Since the coronavirus has taken hold in the US, the country has suffered its worst growth numbers in a decade, the worst retail sales report on record and declines in business activity not seen since the 2008 financial crisis.
Meanwhile, weeks of elevated unemployment claims have far surpassed the prior record of 700,000.
Food pantries have seen spikes in demand, and homeowners and renters have delayed monthly payments.
The National Multifamily Housing Council – an industry group for apartment owners – reported last month that nearly a third of renters did not make their full payment by the first of the month.
Economists are hoping the pain will ease as businesses gradually restart.
Retailers such as Gap have already announced plans for re-opening some stores. Others, including J Crew and department store Neiman Marcus, have been pushed into bankruptcy.
Moody’s Investors Service has predicted that the US unemployment rate could fall back to 7% by the end of the year, but that forecast depends on the virus. The longer the shutdown persists, the harder it will be for the economy to rebound.
President Donald Trump has given governors guidance on reopening state economies in the coming months as the new coronavirus continues to spread across the US.
“Opening up America Again” guidelines outline three phases for states to gradually ease their lockdowns.
President Trump promised governors they would be handling the process themselves, with help from the federal government.
However, there has been a mixed reception to the plans, with a leading Democrat calling them vague and inconsistent.
The US currently has 699,044 confirmed cases and 36,849 deaths due to the virus, and President Trump has suggested some states could reopen this month.
In his daily briefing on April 16, the president declared “the next front in our war – opening up America again”.
He said: “America wants to be open and Americans want to be open. A national shutdown is not a sustainable long-term solution.”
The president said that a prolonged lockdown risked inflicting a serious toll on public health. He warned of a “sharp rise” in drug abuse, alcohol abuse, heart disease, and other “physical and mental” problems.
He told reporters that healthy citizens would be able to return to work “as conditions allow”. He said Americans would continue to be called upon to maintain social distancing measures and to stay home if they are unwell.
President Trump said that reopening the US economy would be done “one careful step at a time” but he called on state governors to move “very, very quickly, depending on what they want to do”.
Shortly afterwards, leading Democrat Nancy Pelosi, Speaker of the House of Representatives, called the new guidelines “vague and inconsistent”.
Nancy Pelosi said the document did “nothing to make up for the president’s failure to listen to the scientists and produce and distribute national rapid testing”.
The Trump administration’s 18-page guidance document details three phases to reopen state economies, with each phase lasting, at minimum, 14 days.
The guidelines include some recommendations across all three phases including good personal hygiene and employers developing policies to ensure social distancing, testing and contact tracing.
Phase one includes much of the current lockdown measures such as avoiding non-essential travel and not gathering in groups. But it says large venues such as restaurants, places of worship and sports venues “can operate under strict physical distancing protocols”.
If there is no evidence of a resurgence of the coronavirus, phase two allows non-essential travel to resume. The guidance says schools can reopen and bars can operate “with diminished standing-room occupancy”.
Under phase three, states which are still seeing a downward trend of symptoms and cases can allow “public interactions” with physical distancing and the unrestricted staffing of worksites. Visits to care homes and hospitals can resume and bars can increase their standing room capacity.
According to the document, some regions could begin returning to normal after a month-long evaluation period, at the earliest.
In places where there are more infections or where rates begin to rise, it could take longer.
Dr. Deborah Birx, the co-ordinator of the White House coronavirus task force, told at the April 16 briefing that as states worked through the three phases, they could allow for more and more employees to return to work in increments.
Phase three would be the “new normal”, she said, and would still include suggestions that vulnerable people should avoid crowded spaces.
The Federal Reserve has raised interest rates
again despite President Donald Trump’s opposition.
The Fed’s key interest rate has been increased by 0.25% to a target range of
However, the Fed officials also said future increases could come at a slower
pace amid concerns about global growth.
The move comes two days after President Trump warned the Fed against making
“yet another mistake” in raising rates, urging it instead to
“feel the market”.
The president also urged the bank not to wind down a multi-billion dollar
stimulus program brought in after the financial crisis.
President Trump – who appointed the Fed’s chairman, Jerome Powell – has
repeatedly blamed the central bank for unsettled markets and dismissed analysts
who cite other factors, such as rising trade tariffs.
His remarks have put pressure on the Fed, as presidents generally avoid criticizing
the bank publicly, for fear of politicizing the institution.
President Trump tweeted: “I
hope the people over at the Fed will read today’s Wall Street Journal Editorial
before they make yet another mistake. Also, don’t let the market become any
more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t
just go by meaningless numbers. Good luck!”
At a press conference on December
19, Jerome Powell defended the Fed’s independence, saying that political
pressure played “no role whatsoever” in its discussions or decisions.
The Fed’s chairman added that the
central bank had no plans to change its ongoing reduction of its portfolio of
Treasuries and mortgage-backed securities.
The central bank has been gradually
raising the benchmark rate since 2015, moving the US away from the ultra-low
rates put in place during the financial crisis to spur economic activity.
The decision, which was widely
expected, marked the ninth increase since 2015 and the fourth this year.
However, the moves have made
borrowing more expensive, contributing to slowdowns in some sectors, such as
With economic growth expected to
slow, some worry that further increases risk stifling economic activity.
On December 19, officials did cut their forecasts for economic growth in
2019 to 2.3%, down from the 2.5% they anticipated in September.
Estimates released by the bank showed most Fed members expect two rate
increases in 2019 – not three, as previously forecast.
It follows a downturn in financial markets and concerns about slowing growth
in the US and abroad.
However, Jerome Powell said the strength of the US economy – which is
expected to grow about 3% this year – justified another rate rise, despite
recent “cross currents” that have weakened the outlook.
He said: “We think this move was
appropriate for what is a very healthy economy.
“Policy at this point does not
need to be accommodative.”
In its official statement, the Fed also said increases to its benchmark rate
would help the US economy sustain its expansion, keeping the unemployment rate
low and inflation near 2%.
Shares sank after the announcement, reversing earlier gains. The Dow and S&P 500 closed about 1.5% lower, while the NASDAQ fell than 2%.
Economists warned that estimates of business inventories, a major factor in the GDP rise, can vary significantly quarter-to-quarter.
Excluding that category, GDP – a broad measure of goods and services made in the US – increased at an annual pace of 2.3%.
The Commerce Department cautioned that its figures did not capture all the losses caused by the storms, which caused widespread closures of factories, offices and airports in states such as Florida and Texas.
Its GDP estimates, for example, do not measure activity in US territories, such as Puerto Rico, which suffered some of the most severe damage.
The Commerce Department estimated that storm-related damage to fixed assets, such as homes and government buildings, totaled more than $131 billion.
It also said it expected the government and insurers to pay more than $100 billion in insurance claims, with foreign companies accounting for more than $17.4 billion.
Commerce Department Secretary Wilbur Ross claimed Friday’s GDP report a sign of progress, calling it a “remarkable achievement in light of the recent hurricanes”.
President Donald Trump has made hitting annual GDP growth of 3% a goal, and pledged tax cuts and other policies intended to reach that pace or higher.
On a year-on-year basis, GDP was up 2.3%, the Commerce Department said in its report, which is an advance estimate that will be revised as more data is collected.
That pace is roughly in line with US expansion since the 2007-2009 recession.
Economists said the underlying economic strength shown in the report makes it more likely that central bankers at the Fed will raise interest rates again by the end of the year, as expected.
The price index for consumer spending, a closely-watched measure of inflation, increased at 1.3% in Q3, excluding food and energy. That remains below the Fed’s 2% target.
The IMF has cuts its growth forecasts for the US economy due to uncertainty about White House policies.
The organization now expects growth of 2.1% in 2017 and 2018, against earlier estimates of 2.3% in 2017 and 2.5% in 2018.
The forecast is also below the 3% rate targeted by the White House.
Proposals such as cuts to spending on programs that benefit low and middle income households could lead to even slower growth, the IMF warned.
“The consultation revealed differences on a range of policies and left open questions as to whether the administration’s proposed policy strategies are best suited to achieve their intended purpose,” the IMF said.
US jobs growth was bigger than expected in April as businesses added 211,000 posts.
According to the US Department of Labor figures, the unemployment rate dropped slightly to 4.4%, compared with 4.5% in March.
The rebound in the jobs market could pave the way for the Federal Reserve to raise interest rates in June.
The US economy needs to create 75,000 to 100,000 jobs a month to keep pace with growth in the working-age population.
An unemployment rate of anything under 5% is considered to indicate full employment. The rate of 4.4% is the lowest since May 2007.
The rise in employment was driven by the leisure and hospitality sectors, health care and social assistance, financial activities and mining.
The report also showed average hourly earnings rose by 2.5% year-on-year, although this was down slightly on March’s figure.
Recent GDP figures showed the US economy grew at an annual rate of 0.7% in the first three months of this year, the slowest rate since the first quarter of 2014, raising concerns that the economy could be weakening.
Earlier this week, the Fed kept its key interest rate on hold in a range of 0.75% to 1%.
However, central bank also said it viewed “the slowing in growth during the first quarter as likely to be transitory” and still expected economic activity to “expand at a moderate pace”.
Meanwhile economists blame that trend on the way the data is collected.
Nancy Curtin, chief investment officer at Close Brothers Asset Management, said: “US GDP figures are typically weaker in the first quarter, so this reading is in line with the seasonal trend.
“We haven’t yet had the expected fiscal stimulus from Trump, the effects of which may not be seen until the end of this year or the start of 2018.”
Nancy Curtin also pointed out that other data suggested strength in the US economy: “While investors might be disappointed with the reading, it has been a steady start to the year with inflation looking benign, a resilient jobs market and positive PMI [purchasing managers’] data.”
According to official figures, the US economy grew at an annualized rate of 1.4% in Q4 of 2015.
The US Commerce Department revised its Q4 GDP to upward from an initial estimate of 0.7%.
Overall, the US economy is estimated to have grown at a rate of 2.4% for all of 2015.
One reason for the revised figure was greater consumer spending than officials initially thought, boosted by an improving labor market.
Analysts had expected the fourth quarter growth rate to remain unchanged from the last estimate of 1%.
Increased employment has helped to slowly boost wages and housing prices, while low oil prices have increased discretionary spending by US households.
The stronger growth rate could increase the chances of an interest rate hike when the Federal Reserve meets in April. The Fed left rates unchanged at its meeting in March, saying the slowing global economy raised risks for the US market.
US corporate profits dipped 11.5% for Q4 compared to the same October through December period in the previous year.
Companies were hurt by low oil prices, with some industrial and petroleum linked companies forced to cut their workforces or file for bankruptcy.
The head of the Federal Reserve, Janet Yellen, has warned financial conditions in the US had become “less supportive” of growth.
The Fed released Janet Yellen’s prepared comments ahead of her latest appearance before Congress.
The central bank raised interest rates by 0.25% for the first time in nine years in December 2015.
In the prepared testimony, Janet Yellen said: “Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers and a further appreciation of the dollar.
“Against this backdrop, the [Federal Reserve] Committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen.”
Janet Yellen added China’s “unclear” currency policy was fuelling global stock market volatility.
She said the decline in China’s currency, the yuan, had “intensified uncertainty about China’s exchange rate policy and the prospects for its economy”.
“This uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth.”
While Janet Yellen said she was confident China’s economy was not facing a “hard landing”, the Fed chief said the overall uncertainty created by the world’s second-largest economy was behind some of the steep falls in global commodity prices, which in turn were creating stress for exporting nations.
Janet Yellen added that “low commodity prices could trigger financial stresses in commodity-exporting economies” as well as in commodity-producing firms around the world.
If such problems materialized, she added, “foreign activity and demand for US exports could weaken and financial market conditions could tighten further”.
Following her prepared testimony Janet Yellen responded to questions in Congress about the new way in which the central bank implemented its last rate rise.
Congress is concerned the new policy benefits the country’s banks more than the American public, because banks receive a higher interest rate on the reserves they hold at the Fed.
Supporters of the interest rate on excess reserves (IOER) policy say it allows the Fed to maintain control of the market.
Janet Yellen has called the policy a “traditional tool” for adjusting rates, citing its use by other central banks around the globe. The Fed was given the power to offer IOER by Congress in 2006.
US stock markets opened higher after the comments.
Recent stock market turmoil has prompted most Wall Street analysts to push back their forecast of when the next US Federal Reserve interest rate rise will occur, from March to June at the earliest.
US stock markets have taken a battering in recent weeks over concerns caused by the economic slowdown in China, which has in turn led to lower commodity and oil prices, while the weaker yuan has made Chinese exports cheaper than those from the US.
The Dow Jones is down some 8.5% since the start of the year, the S&P 500 is down more than 9% since January 1 and the NASDAQ is lower by 14%.
US economic growth in the last three months of 2015 also slowed dramatically, to 0.7% compared with the same period a year earlier, falling from 2% three months earlier.
According to the new data from the Bureau of Labor Statistics, the US economy added 151,000 jobs in January 2016.
The new jobs helped to push the US unemployment rate down to 4.9%.
The number was lower than expected and is a sharp slowdown from December 2015, when 292,000 jobs were added.
Job losses in transport and education weighed on the numbers, the Bureau of Labor Statistics said.
Last week, figures showed that US economic growth slowed to an annual rate 0.7% in the final three months of 2015, from 2% in the previous quarter.
Early trading on Wall Street suggests investors are concerned that the slowdown in job creation could be a further signal of a weakening US economy. The main Dow Jones was down 189 points, or 1.2%, at 16,227.43 in early-afternoon trading.
Photo Getty Images
However, some analysts focused on the positive – that weaker job numbers meant another rise in interest rates was unlikely for now.
President Barack Obama highlighted the low unemployment rate as he plugged aspects of his spending bill to be proposed next week. He plans to push for greater investment in clean energy, where jobs growth has been strong.
The president acknowledged that there was still anxiety among Americans, but said the US economy was “stronger and more durable” then before the financial crisis.
Retailing saw the highest number of jobs created in January, at 58,000, with healthcare adding 37,000 and manufacturing 29,000.
Some 39,000 jobs were lost in private education services, however, with a further 20,000 lost in transport and warehousing.
The net job creation pushed the unemployment rate below 5% – where it had stood for the previous three months – to its lowest level since early 2008.
The labor participation rate was unchanged, suggesting fewer people are dropping out of the labor market – a key problem during the financial crisis.
The average hourly rate rose by 12 cents, or 0.5%, to $25.39.
According to the Department of Commerce, the US gross domestic product (GDP) grew at an annualized pace of 1.5% in Q3 of 2015, down from a rate of 3.9% in Q2.
The slowdown was partly due to companies running down stockpiles of goods in their warehouses.
On October 28, the Federal Reserve kept rates unchanged and said the economy was expanding at a “moderate” pace.
Low oil prices have hit American energy companies so far this year.
However, lower fuel prices have been good news for consumer spending, which accounts for more than two-thirds of US economic activity.
Consumer spending grew at 3.2% in Q3, down from 3.6% in the second but still a strong reading.
Analysts said that the running down of warehouse stockpiles in Q3 was likely to be a temporary effect and they expected growth to accelerate again in Q4.
For several months there has been intense debate about when the Fed will raise interest rates, and now the focus is on its last meeting of the year in December.
The Fed has said in past statements that it expects to raise rates in 2015, and that labor market participation, inflation and the global economy would be the key factors in its decision.
In its latest statement on October 28, the Fed said: “In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2% inflation.”
However, the Fed dropped comments, which had been used in the previous month’s statement, that weaknesses in the global economy could affect the US.
Financial markets interpreted this as a sign that the Fed might be more likely to raise rates in December.
According to the Labor Department figures, the US economy added only 142,000 jobs in September 2015, lowering the chance of an interest rate rise this year.
The number of jobs created in September was far lower than the 205,000 increase forecast by economists.
The July and August figures were revised down by a combined 59,000.
On October 2, Wall Street opened sharply lower, with the Dow Jones and S&P 500 indexes both down about 1.3%.
However, both indexes later recovered to be up about 0.5% and 0.6% respectively.
The poor figures also resulted in a rollercoaster ride for the FTSE 100, which ended the day up 0.9% at 6,129.9 points despite also turning negative in afternoon trading.
The Labor Department numbers reinforced fears that the China-led global economic slowdown is hitting America’s recovery, adding to doubt about whether the Federal Reserve will raise rates before 2016.
The number of new jobs for August was cut by 37,000 to 136,000 – in sharp contrast to the upward revision expected by economists.
The July total was also reduced, by 22,000 to 245,000.
The number of new jobs created in the US has averaged 198,000 a month for 2014 – below last year’s average of 260,000.
However, the unemployment rate held steady at 5.1%.
The jobless rate, which is derived from a separate survey of households, was unchanged only because 350,000 workers stopped looking for work last month and were no longer counted as part of the labor force.
The proportion of Americans who either have a job or are looking for one fell to a 38-year low, partly reflecting retirements of older workers from the baby boomer generation.
Average hourly wages fell by 1 cent to $25.09 during the month and were only 2.2% higher than the same month in 2014.
The data also knocked the dollar lower, with the pound rising 0.6% to $1.5238 after the numbers were released. Yields on government bonds also fell.
According to revised official figures, the US economy expanded more than previously estimated in Q2 2015.
The US Commerce Department said the economy expanded at an annualized pace of 3.9%, rather than 3.7%.
The overall US economic growth was due to strong consumer spending, business investment and residential construction.
Photo Getty Images
It rate is much higher than the 0.6% rate recorded in Q1 2015.
The growth rate is expected to have slowed in the current quarter, but in a speech on September 24 Federal Reserve head Janet Yellen said economic growth appeared “solid” and the US remained “on track” for an interest rate rise this year.
Janet Yellen said as long as inflation was stable and the US economy was strong enough to boost jobs, the conditions would be right for a rise.
US interest rates have been held at near-zero since the 2008 financial crisis. When they finally do rise, it will be the first interest rate increase in nine years.
Stocks on Wall Street made a bright start in the wake of the GDP figures and Janet Yellen’s comments, with the Dow Jones rising 1% in morning trade.
The Department of Labor has reported on September 4 that the US economy added 173,000 jobs in August.
This is the last unemployment report before September’s interest rate decision by the Federal Reserve.
The number of jobs was below the 217,000 predicted by analysts, although the Labor Department said that figures for August tend to be revised higher subsequently.
The unemployment rate fell to 5.1% – down from the July figure of 5.3%.
The rate is the lowest since April 2008.
Wall Street headed lower following the numbers, with the S&P 500 falling 1.3% and the Dow Jones industrial average shedding more than 200 points or 1.2%.
European stock markets, which had been trading lower before the data was released, extended their losses, with the FTSE 100 in London down 2% and indexes in Paris and Frankfurt dropping about 2.6%.
There were upward revisions to the number of jobs created in the previous two months, which added another 44,000 jobs. The revised figure for July was 245,000 jobs.
The weaker-than-expected August number could make Fed officials think twice about increasing rates when they meet on September 16-17.
Chris Williamson, chief economist at Markit, said the decline in the unemployment rate could be the clincher for a September rise.
However, he added: “The most likely scenario is one where the Fed waits a little longer in the light of recent economic and financial market instability, instead merely testing financial market reactions with rhetoric that a rate rise is increasingly imminent.”
One of the officials who will help make that decision said on September 4 that the US labor market had recovered sufficiently to warrant raising rates soon.
Richmond Fed President Jeffrey Lacker, who had called for a rate increase in June, said the US economy no longer needed rates to be so low.
Fed officials will also take into consideration volatile global financial markets and slowing growth in China.
According to the latest official figures released by Commerce Department, the US trade deficit with the rest of the world fell to a five-month low in July.
The US trade deficit declined 7.4% to $41.9 billion, compared with $45.2 billion in June, the US Commerce Department said.
It represents the difference between the value of what the US exports to the rest of the world and what it imports.
Exports rose 0.4% to $188 billion, helped by stronger global sales of US cars. Imports fell 1.1% to $230.4 billion.
For much of the year, the US trade deficit has been about 3.6% higher than the previous year as a result of lower export sales.
Some in the US remain concerned that economic growth will be hurt by further declines in exports as a result of a stronger dollar and continued overseas weakness in the world’s second-largest economy, China.
Sal Guatieri, senior economist at BMO Capital Markets, forecast trade would continue to drag on US economic growth over the next year. He added a stronger dollar would harm exports and boost demand for imports by making foreign goods cheaper for US consumers.
A sharp slowdown in China in recent market has led to volatile financial markets in recent months, as investors have become concerned that China’s slowdown could have an adverse impact on global growth.
The International Monetary Fund (IMF) said on September 2 that China’s slowdown, volatile financial markets and falling raw materials prices could lead to “a much weaker outlook'” for global growth.
The price of raw materials such as oil and copper has fallen sharply, increasing the economic problems of Brazil, Russia and other commodity exporters.
The July trade report showed that America’s deficit with China rose 0.4% in July to $31.6 bn, the highest level in nine months.
So far this year, the US deficit with China is 8.5% higher than in 2014 and is on track to notch up another annual record. The US trade gap with China is its largest with any country.
Elsewhere, the US trade deficit with the EU climbed to a new record high of $15 billion, as US exports to the EU fell by 5%.
In August, China allowed its currency to devalue, a move that was largely seen as a way to boost exports. But the move will also widen its deficit with nations such as the US.
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