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Volunteers from the women’s organization Nuevo Amanecer Mujer Integral help distribute frozen turkeys and boxes of food before Thanksgiving to families affected by the Covid-19 pandemic on November 18, 2020 in Los Angeles, California.
Frederic J. Brown | AFP | Getty Images
Economists at JPMorgan are now seeing an economic contraction in the first quarter due to the spread of the coronavirus and related restrictions imposed by states and cities.
The new forecast diverges from Wall Street’s widely held view that the first quarter is positive, with the economy improving through 2021.
Economists at JPMorgan said they expected the economy to grow rapidly in the second and third quarters, based on the positive developments in vaccines.
“This winter will be bleak and we believe the economy will contract again in Q1,” the economists wrote.
They expect the first quarter to contract by 1% after growing 2.8% in the fourth quarter. For the second quarter, they see the economy rebounding and growing 4.5%, followed by a robust 6.5% in the third quarter.
Economists also expect around $ 1 trillion in fiscal stimulus, likely from the end of the first quarter. This should help stimulate growth in the middle of the year.
“One thing that probably will not change between 2020 and 2021 is that the virus will continue to dominate the economic outlook. … The number of cases in the last wave easily exceeds the waves of March and July,” wrote economists.
They noted that the economic reopening helped the economy during the July outbreak. “The economy no longer has that tailwind; instead, it now has to face the headwind of increasing restrictions on activity. The holiday season – from Thanksgiving to New Years – threatens a further increase in cases “, they added.
Economists also expect to see monthly declines in employment at different times over the next few months, but monthly employment gains should return several million by the middle of the year, then moderate again to the end of 2021.
“We believe labor market trends should roughly follow what we expect for consumer spending – job growth is expected to weaken significantly at the start of the year as the virus weighs on the economy. economy and recover early next year once the vaccine distribution will be attenuated. the virus problems and budget support stimulate growth, “they wrote.
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