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CBO projects high unemployment through at least 2021
New projections from the Congressional Budget Office (CBO) of key economic variables reveal an expected sharp contraction in the economy in the second quarter with the unemployment rate projected to average 15 percent during the second and third quarters of 2020 and remaining as high as 9.5 percent by the end of 2021. CBO projects GDP will decline by about 12 percent during the second quarter. Federal debt held by the public is projected to be 101 percent of GDP by the end of the fiscal year, up from 79 percent at the end of FY 2019, but below the all-time high of 106 percent in 1946 following World War II.
CBO expects the contraction in the second quarter will ease in the third quarter this year with an increase in economic activity. However, the report cautions, “challenges in the economy and the labor market are expected to persist for some time.”
The new projections from the CBO take into account the estimated effects of the deficit of relief packages due to the coronavirus, but is still more limited than an updated baseline, which CBO expects to publish later this year. In mid-May, CBO plans to release details underlying its economic outlook for 2020 and 2021.