US Economic Outlook for 2020 and Beyond

Experts Forecast a U-Shaped Recession

economic outlook
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The U.S. economic outlook is for a U-shaped recession according to the key economic indicators. Governors ordered nonessential businesses to shut down to stop the spread of the COVID-19 pandemic.

The most critical indicator is the gross domestic product, which measures the nation's production output.

As a result, the GDP growth rate could fall as much as 50%. That's about the depth experienced during the Great Depression, but it shouldn't last as long. Unemployment could be as high as 30%.


In just a few months, the COVID-19 pandemic decimated the U.S. economy. Growth declined by 5% in the first quarter, signaling the onset of the 2020 recession.

The NBER announced in early June that "the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions."

In April, retail sales plummeted 16.4% as governors closed nonessential businesses. As companies furloughed workers, the number of unemployed shot up to 23 million.

The Congressional Budget Office predicts a modified U-shaped recovery.

These early indications reveal that the second quarter will be worse. The Congressional Budget Office predicts the economy will decline by 38%. The number of unemployed will rise to 26 million. The third quarter will improve, but not enough to make up for earlier losses. Effects will linger until the fourth quarter 2021, with slightly lower economic output and higher unemployment.

Economic Growth

U.S. GDP growth will contract by 6.5% in 2020. It will rebound to a 5% growth rate in 2021 and 3.5% in 2022. That's according to the most recent forecast released at the Federal Open Market Committee meeting on June 10, 2020.


The unemployment rate will average 9.3% in 2020. That's much higher than the Fed's 6.7% target. It will drop to 6.5% in 2021 and 5.5% in 2022. The rate peaked at 14.7% in April 2020. More than 20 million workers were let go from their jobs in response to the pandemic.

The real unemployment rate includes the underemployed, the marginally attached, and discouraged workers. For that reason, it is around double the widely-reported rate. You can put this report into perspective by viewing the unemployment rates since 1929.


Inflation will average 0.8% in 2020. It will rise to 1.6% in 2021 and 1.7% in 2022. The core inflation rate strips out volatile gas and food prices. The Fed prefers to use that rate when setting monetary policy. The core inflation rate will average 1.0% in 2020, 1.5% in 2021, and 1.7% as well in 2022. The core rate well below the Fed's 2% target inflation rate. The U.S. inflation rate history and forecast helps predict the coming years’ inflation levels.

Interest Rates

On March 15, 2020, the Federal Open Market Committee held a special meeting to cushion the economic impact of the COVID-19 coronavirus outbreak. It lowered the current fed funds rate to a range between 0.0% and 0.25%. That's after lowering it to a range of between 1.0% and 1.25% on March 3.

The fed funds rate controls short-term interest rates. These include banks' prime rate, the Libor, most adjustable-rate loans, and credit card rates. You can protect yourself from any rate hikes by choosing fixed-rate loans wherever possible.

The Fed is also working on keeping long-term rates low. It restarted its quantitative easing program. On March 15, 2020, the Federal Reserve announced it would purchase $500 billion in U.S. Treasurys and $200 billion in mortgage-backed securities over the next several months. On March 23, 2020, the FOMC expanded QE purchases to an unlimited amount.  By May 18, its balance sheet had grown to $7 trillion.

By buying bank securities, the Fed reduces supply in the Treasurys market. That increases the prices and lowers the return, or yield, on these long-term notes. Those yields set the benchmark for fixed-rate mortgages and corporate bonds.

Treasury yields also depend on the demand for the dollar. Demand is high, so that also puts downward pressure on yields will drop. Once the global economy recovers, investors will demand less of this ultra-safe investment.

Oil and Gas Prices

The U.S. Energy Information Administration provides an outlook on oil and gas prices from 2020 to 2050. It predicts crude oil prices will average $34 a barrel in 2020 and $48/b in 2021. That's for Brent global. West Texas Crude will average around $4/b less.

The EIA's energy outlook through 2050 predicts rising oil prices. By 2025, the average Brent oil price will increase to $79/b. This is a quote in 2019 dollars, which removes the effect of inflation. After that, world demand will drive oil prices to the equivalent of $214/b in 2050. By then, the cheap sources of oil will have been exhausted, making crude oil production more expensive.

This forecast does not take into account the effects of climate change. Governments may increase renewable energy production to stop global warming. That would reduce the price of oil significantly.


The Bureau of Labor Statistics publishes an occupational outlook each decade. It goes into great detail about each industry and occupation. Overall, the BLS expects total employment to increase by 8.9 million jobs between 2018 and 2028. 

The BLS forecast does not take into account the effects of the COVID-19 pandemic.

Health care occupations will account for 18 of the 30 fastest-growing occupations. One reason for that is the aging of the population. Computer and math occupations, and those based on alternative energy production, will also grow rapidly.

Three occupational groups will lose jobs. These include production, administrative support, and sales. These jobs are being replaced by computer and technological solutions. Retail sales will also lose jobs, as e-commerce continues to predominate. That shift will also increase jobs in transportation and warehousing.

Climate Change

The Federal Reserve is concerned about how climate change is affecting the economy. Research from the Richmond Fed estimated that it will reduce U.S. economic growth by 30% over the next century.

The Fed is also requiring banks to plan for the economic impact of increased extreme weather. For example, it is asking Florida banks to have risk management plans for hurricanes.

Former Federal Reserve Chairs have urged Congress to enact a carbon tax to lower the dangerous levels of greenhouse gas emissions.

Damage from natural disasters, such as hurricanes, floods, and wildfires, was $150 billion in 2019. That’s lower than the record $350 billion set in 2017, and the $186 billion in 2018. These disasters killed 9,000 people in 2019 and 15,000 people in 2018. Insurance companies paid out $52 billion in 2019 damage claims and $86 billion in 2018. The industry is frustrated by the lack of action on global warming solutions.

These have become worse and more frequent due to global warming. There were 820 natural disasters in 2019, compared to only 520 a year between 1989 and 2018.

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Article Sources

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