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University of Michigan Releases US Economic Outlook for 2020–2022

May 20, 2020
The Research Seminar in Quantitative Economics at the University of Michigan has released the U.S. Economic Outlook for 2020-2022. The fallout of the COVID-19 pandemic has brought the global economy to its knees resulting in historic economic impacts. Expectations suggest real gross domestic product (GDP) will shrink at a 30% annual rate in 2020 Q2 and the unemployment rate will exceed 17%.

Expectations suggest a sharp turnaround will start as soon as June. The outlook is optimistic that a dramatic second wave of new cases can be avoided, and that schools will reopen in person in the fall. Social distancing is expected to continue over the next several quarters, stemming largely from private sector caution rather than government mandates.

Epic policy support by the Federal Reserve has prevented the public health crisis from spiraling into a financial crisis. Since early March, the size of the Federal Reserve’s balance sheet ballooned by $2.8 trillion to a record of $7 trillion as of May 13, and it could top $10 trillion soon. The federal deficit is expected to rocket up to World War II–like 15.8% of GDP in fiscal 2020.

Highlights from the April jobs report include:

  • Total nonfarm payroll employment fell by a historic 20.5 million jobs, wiping out a decade of job gains in a few short weeks.
  • The unemployment rate jumped from 4.4% in March to 14.7% in April.
  • The labor force participation rate dropped to 60.2%, its lowest level since January 1973.

Economic Outlook Summary:

  • Expect annual real GDP to shrink by 4.0% in 2020, followed by a 3.3% expansion in 2021, and growth of 2.1% in 2022.
  • Unemployment rate peaks at 17.4% in 2020Q2, but quickly retreats to just under 9 %in 2020Q4, to average 10.5% for 2020

Source: Research Seminar in Quantitative Economics, University of Michigan

View more information on the May 2020 U.S. Economic Outlook.