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JPMorgan sees negative GDP growth but says the US will skirt a technical recession


Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 2, 2020.

Brendan McDermid | Reuters

An economic slowdown is inevitable in the face of the fast-spreading coronavirus, but the U.S. will eventually avoid a technical recession, JPMorgan economists said.

As the outbreak situation continued to worsen, JPMorgan slashed its forecast for U.S. and global GDP further, now seeing negative growth in two consecutive quarters. The bank called for a “novel-global recession,” but didn’t expect an official downturn to be declared. 

“COVID-19 is expected to roll through the global economy over February, March, and April, generating GDP contractions in most countries for at least one of the two quarters it straddles,” Bruce Kasman, JPMorgan’s chief economist, said in a note. “If our current forecast is realized it seems appropriate to characterize it as a novel-global recession.”

While a fall in GDP in two straight quarters typically defines a recession, in order for the National Bureau of Economic Research to label an official recession, the slowdown needs to last for “more than a few months.” Additionally, there needs to be low readings in different economic indicators, including real GDP, real income, employment, industrial production and wholesale-retail sales. 

“Our forecast for a mid-year growth rebound would not fit the NBER criteria that recessions should last for more than a few months,” Kasman said.

JPMorgan expects a fading of the coronavirus outbreak to promote a recovery in activity into midyear 2020, followed by an acceleration in growth in the second half of the year.

As of Friday, global cases of the coronavirus had reached at least 135,000 with nearly 5,000 deaths. Cancellations and restrictions for large events and businesses were imposed. The NCAA has canceled its March Madness basketball tournaments, a day after the National Basketball Association suspended the remainder of its season indefinitely.

“The breadth of ‘social distancing’ is increasing at a dramatic pace. Italy is now in total lockdown and the US as well as other countries are suspending flights from a wide range of nations,” Kasman said.

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