Labor Compensation. These two factors are key to the short-term outlook in our baseline. Specifically, relative to its April peak, the degree of social distancing is expected to diminish by roughly two-thirds during the second half of 2020 and diminish further, but by smaller amounts, through the third quarter of 2021. A large decline in the stock market from mid-February to mid-March also prompted some households to cut spending. Personal spending picks up in September, and state and local spending remains steady. Supplemental data for this analysis are available on CBO’s website (see www.cbo.gov/publication/56351). Businesses face uncertainty in several dimensions. The size of the labor force is the number of people in the civilian noninstitutionalized population who are at least 16 years old and either working or unemployed. 13. In contrast, real output in China and South Korea is expected to decline by 5 percent and 4 percent, respectively, over that same period. Increased in June, The Conference Board Leading Economic Index® (LEI) for the U.S. The pandemic and social distancing have widely.

The Bureau of Labor Statistics (BLS), which publishes the unemployment rate and other labor statistics each month, noted that the April unemployment rate probably understated the share of unemployed workers in the labor force because many workers who should have been classified as “unemployed on temporary layoff” were probably misclassified as “employed absent from work” in the Current Population Survey. Increases in consumer spending are expected to more than offset further declines in business investment during that period. Get the Deloitte Insights app. Although CBO expects BFI to increase by 13.4 percent in 2021, it will remain 4.5 percent lower in the fourth quarter of that year than it was two years earlier. Sources: Congressional Budget Office; Bureau of Economic Analysis; Bureau of Labor Statistics; Federal Reserve. That might have made for happy motorists, except that miles driven also fell—in fact, that was a key driver of low gasoline prices. Before the pandemic began, almost 30 percent of workers reported that they could work from home.11 Since the start of the pandemic, many more workers have needed to do so, often on a full-time basis. The supply shock of the pandemic has clearly raised certain prices. Given that COVID-19 poses a much higher risk to older people than to younger people, the labor force participation rate of the former group is expected to remain depressed as long as the pandemic continues. Given the severity of the economic contraction in the second quarter even a moderate improvement in economic activity over the summer will yield a strong growth rate in the third quarter. Sources: Congressional Budget Office; Federal Reserve. Over that period, the largest changes in outlays stemmed from greater payments for refundable tax credits and increases in spending for Medicare, the Coronavirus Relief Fund, unemployment compensation, and the Provider Relief Fund. In April, the unemployment rate surged to 14.7 percent, the highest rate in the history of the monthly data series (which goes back to January 1948).

The standard unemployment insurance provides a surprisingly small replacement for income—about 40% to 45% on average for the country as a whole, and much less in some states2—and the supplement’s elimination means that personal income declined substantially in August, with a likely corresponding hit to consumer spending and the economy. The UI expansion provides money to laid-off or furloughed workers without moving them back into employment. In CBO’s estimation, social distancing across the country reached its peak in April 2020. has been saved, United States Economic Forecast The GDP number won’t be wrong—it will just be out of date. In a world of high unemployment, businesses will have little pricing power but will face higher costs. The effects of policy actions on CBO’s projections of inflation and interest rates are also uncertain, particularly in light of the rapid increase in federal borrowing in response to the pandemic. * = between -0.05 million and 0.05 million. The establishment survey covers only people on the payrolls of nonagricultural establishments, whereas the broader household survey includes self-employed workers, agricultural workers, unpaid workers in family-owned businesses, and employees of private households.