Economists for JPMorgan Chase have revised their Q2 U.S. GDP forecast to a 40% decline. Previous estimates from the largest bank in the US had indicated a 25% decline. [CNBC]

Additionally, the economist team has suggested unemployment will surge to 20% in April. This figure would bring job losses to 25 million. The figures indicate that the economic contraction due to COVID-19 is continuing.

Walking blindfolded

The complexity of evaluating the current economic climate, as well as predicting future impacts, remains substantial. The team’s report suggests that their initial focus on demand had given rise to the previous 25% estimate.

However, as the team continued to evaluate the impact of the shelter at home orders, the supply side also became a factor. Reduced working hours has created a substantial decline in production and effectiveness of labor.

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The former ways of evaluating market responses have been incapable of offering insight into the current crisis. In their place, new methods must be evaluated. According to the report:

“Over the last few weeks forecasters have been operating in a fog. Economic models that have been trained on post-war data face obvious limitations. In their place we have reverted to differing ways to address the outlook.”

Silver lining

While these statistics appear dire, the team did indicate that the second half of 2020 would begin the recovery process. They foresee Q3 and Q4 increases in GDP of 23% and 13%, respectively.

Because the economic shutdown has been precipitated by widespread lockdowns rather than other market conditions, the team sees a relatively rapid recovery. Once the orders have been lifted and workers are able to return to the jobs that are left, the economy can begin to recover.  The economic stimulus package may also have positive effects.

Cryptocurrency response

As the overall economy has contracted, the prices of cryptocurrencies contracted as well. The price of Bitcoin declined sharply in the first half of March, dropping briefly below $4,000.

After the first contraction, however, Bitcoin has stabilized in part. The price has since recovered to over $6,500  and appears to have found support at that level.