IPC Posts October Economic Outlook

IPC’s Economic Report for October has been posted. IPC’s Chief Economist, Shawn Dubravac, PHD, said, “The third and final revision to economic growth in the second quarter was little changed. The economy fell by 31.4 percent (annualized). The prior record was a decline of 10 percent in 1958 (also during a pandemic). The economy is down 8.5 percent from a year ago. Expectations for Q3 growth have improved. The latest estimate from the Federal Reserve Bank of Atlanta’s GPDNow forecast is 35 percent — the strongest growth recorded in more than 40 years. This in turn
has brought up expectations for the full year. However, we are still a full year away from a complete recovery and longer for certain sectors of the economy.”

The current economic outlook is unsettled. While the economic recovery remains intact, it is losing momentum and downside risks are rising. The economic rebound continues in the face of rising numbers of COVID-19 cases in the United States and Europe that could stymie the recovery not only in these respective markets but also in China and elsewhere in the world.

In the United States, much of the data we watch closely improved in the last month but at a decreasing rate. Employment, for example, recorded 661,000 new jobs with upward revisions to prior months of another 145,000. In a normal year, a monthly gain of 661,000 would be phenomenal. In fact, it’s the fourth best monthly gain in history, only outpaced by the prior three months. But those 661,000 new jobs come in the shadow of losing 22.2 million jobs. And they come following several months of faster recovery. The U.S. labor market has added back about half of the jobs lost in March and April. Moreover, labor force participation declined in September as some job seekers abandoned their searches. And as the pandemic has pushed schools virtually, some caretakers have likely been forced to put off work for now while they care for young children.

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