Bloomberg forecast the probability of the US economic recession up to 100%.
Last year, Bloomberg economists created a model to determine the recession rate of the US economy, and now it has reached 100%, ending the longest expansion period of the background. US economy in recent times.
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Most of the economic data for this model has lag, as the number of unemployment claims applied for statistics with a delay of less than a week has increased to an unprecedented level in March.
About 10 million applications for unemployment benefits over two weeks showed a sharp decline in the labor market.
The model of possibility of US economic recession in 12 months is at 100%.
This model of recession-calculation is developed by economists Bloomberg and is combined with data including economic conditions, financial markets and measures of potential risks.
The increase in the probability of the US economic downturn reflects the unemployment figures, but a sharp decline in share prices is one of the causes.
According to the calculation of this model, the probability of recession is calculated in February as 33% and in March is 53%.
The United States is now completely different from a month ago. With over 11,000 deaths, more than 400,000 people are infected with Covid-19 and is also the country with the highest number of cases in the world. Social meetings were limited, and most Americans had to stay home. Restaurants, hotels, factories and a variety of businesses are closed.
This sudden shutdown caused economic experts to predict that the US economy would experience the largest-ever contraction. Besides, some analysts predict that there will be about 20 million unemployed in July.
The current American population is increasingly pessimistic about the economic outlook, a measure of consumer sentiment that had dropped the most sharply last month since October 2008. The employment report for March showed that the number of jobs cut by about 701,000 - the most since the Great Depression.
Typically, the increase in unemployment claims is an indicator that economists rely on to signal the possibility of a US recession. This time this indicator has grown so fast that economists have come up with a scenario about the US economy being seriously hurt and entering a recession.
Accordingly, the Fed has introduced policies to support the economy through lowering interest rates to 0% in March and buying large quantities of treasury bonds and securities secured with collateral to keep The market is stable and reduces borrowing costs.
The US government has also taken quick actions, in March, President Trump signed through the largest support law in the US economic history with a value of about $ 2,200 billion. This support package includes direct payments for many Americans and financial assistance for small businesses.
The Federal Reserve recently launched a $ 2,300 billion stimulus package to lend to businesses with more than 10,000 employees affected by Covid-19 for four years, and to buy back local state bonds. , counties badly affected by the disease.
Fed rate cuts during the recession.
According to economic theory, a recession will occur when the economy grows negative in two consecutive quarters. Besides, according to the National Bureau of Economic Research (NBER), the recession is a significant decline spread out in economic activity and lasts more than a few months.
The chart below shows that not all recessions are created equal. The deep recession of 2007-2009 was particularly prolonged because it occurred simultaneously with the financial crisis. While other recessions are somewhat milder.
Quarterly US GDP during recessions
Recession is often accompanied by rapid increase in unemployment. The unemployment rate varies between recessions depending on the breadth and severity of the recession.
While the unemployment rate peaked at 10% in 2009 even higher than in the early 1980s, while other recessions had a smaller unemployment rate. Many economists predict unemployment will leap to adolescence and higher in the coming months.
Quarterly US unemployment rate during recessions.