Congress just passed a $2 trillion stimulus package. This figure equates to 9% of 2019 U.S. GDP of $21.5 trillion. As COVID-19 rapidly spreads and has become a pandemic, vast swaths of the global economy are shut down, which should lead to mounting unemployment and a deep recession.

The second-to-last week of March 2020’s jobless claims spiked to 3.3 million. Many thought that was an unfathomable number. However, we just received the jobless claims for the last week of March and they were 6.6 million. To put into context just how high that number is, 4% of the American workforce lost their jobs in one week and the 6.6 million initial claims are about 10 times the peak of 665,000 in the 2008-09 recession and the all-time record of 695,000 in October 1982.

Demand destruction as a result of this virus is so bad that the consensus estimate for Q2 2020 GDP growth is now in the -20% to -25% range (with an extremely wide dispersion, reflective of the uncertainty). This level of contraction is unparalleled in U.S. history, even in the Great Depression.

Given the magnitude and duration of the coming economic decline, it is our opinion that the U.S. government will need to come back with additional (and perhaps several more) stimulus packages in the coming months.

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