July 1, 2020 | Economic Outlook

Economic Outlook - July 2020


  1. The U.S. economy decreased -5.0% on an annualized basis in the first quarter of 2020, due to lackluster demand and government-mandated shutdowns related to COVID-19. Estimates for second quarter GDP growth, which included four to eight weeks of lockdowns in many states, range from -30% to -40% annualized. We believe Q2 will be the trough of this recession, and anticipate a rebound in economic activity in the second half of the year. We expect GDP for all of 2020 to decline by -4.5% to -6.5% compared to 2019.

  2. The labor market is recovering. After falling by -1.4 million in March and -20.7 million in April, payrolls jumped 2.7 million in May and 4.8 million in June. The June unemployment rate stands at 11.1%, a marked improvement from 14.7% in April.

  3. Savings have ramped up as consumers continue to receive paychecks or government support, but have limited ability to make purchases during lockdown. The personal savings rate skyrocketed to 32% in April and 23% in May from a 2019 rate of 7.9%. These savings represent accumulated spending power that should boost the economy as it reopens.

  4. The U.S. government will conduct three phase-3 coronavirus vaccine trials this summer. The vaccine candidates were developed by Moderna, Johnson & Johnson, and through a joint effort by AstraZeneca and Oxford. Each trial will include 30,000 people.

  5. To mitigate the economic effects of the virus and lockdowns, the federal government boosted unemployment checks by $600 per week and banned evictions from federally assisted properties. Some cities and states also halted evictions. Both the extra unemployment benefits and eviction moratoriums will expire at the end of July unless Congress passes an extension. Congress did vote to extend the Paycheck Protection Program, which extends loans to small businesses weathering the pandemic, through August 8th.

  6. On June 15th the Fed announced that it would purchase up to $750B of individual corporate bonds as a complement to its existing bond ETF purchase program. The Fed’s balance sheet has risen to a record $7 trillion since it began its latest round of quantitative easing in March.

Sources: Bloomberg LLC, FactSet, U.S. Commerce Department, Bloomberg Businessweek, IHS iSuppli

Disclosure: This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.

If you would like to receive your copy of the Economic Outlook and Investment Review monthly in the mail, call Ed Sullivan, Vice President, at 617-557-9800, or email him at