White House economists say they believe the third quarter of 2020 will be the best in US history — channeling new optimism as states reopen following coronavirus lockdowns.
Kevin Hassett, a senior adviser to President Trump, told reporters on Friday that he expects US GDP to drop by about 40 percent in the second quarter before springing back.
“There’s a lot of uncertainty, but we expect that, like along with the Congressional Budget Office, they expect that the third quarter will be the highest growth quarter in US history,” Hassett said.
On Thursday, White House National Economic Council Director Larry Kudlow also pointed to the CBO report, saying its projected third-quarter growth would be “the biggest growth quarter in American history.”
The increasingly optimistic messaging follows Trump’s frequent description of the third quarter as a transition. On Wednesday — before the CBO’s projections were released Thursday — Trump called the third quarter “a great transition period.”
The CBO report projected a 37.7 percent plunge in GDP in the second quarter, followed by a 21.5 percent surge in the third quarter and a 10.4 percent increase in the fourth quarter.
The budget office’s report wasn’t all good news, however, including an estimate of continued high unemployment as a result of the coronavirus crash, which left nearly one quarter of US workers unemployed. The report estimated that unemployment would average 9.3 percent in 2021.
Hassett told reporters that employment would recover more slowly than economic output, and that he expects the US unemployment rate to peak in June. He said there’s no evidence yet that unemployment is dropping in states that are allowing businesses to reopen, but that the growth of unemployment has slowed in those states.
“We’re having an episode that will be studied by economic historians forever and ever because we’ve had about the biggest negative shock we’ve ever seen, accompanied by the biggest positive policy response we’ve ever seen,” Hassett said.
Hassett, a former Columbia Business School professor, said he doesn’t believe that anything has changed this week as Republicans signal greater openness to a fifth major coronavirus response bill. Trump and congressional Republicans discussed a fifth package on Thursday.
“I don’t really feel like something changed in the last 24 hours,” Hassett said. “We’ve been planning for a phase four deal in case one happens. We met with the president last week to go over options, so I think we’re ready.”