Coronavirus resulted in unprecedented shock to US economy, says WH official

The coronavirus pandemic has resulted in an unprecedented shock to the American economy, a top White House official said on Sunday, as he projected second-quarter negative GDP growth between minus 15 and minus 20 per cent.

The coronavirus, which originated in China's Wuhan city, has claimed over 2,00,000 lives and infected nearly 3 million people in the world so far. There are nearly a million confirmed coronavirus cases with over 54,000 deaths in the US.

"This is an unprecedented shock to the economy, that we're going to be looking at second-quarter negative GDP growth that's probably north of minus 15, minus 20 per cent," White House senior economic adviser Kevin Hassett told ABC News.

"It's the biggest negative shock that we have seen since the World War II. With that kind of an emergency, the good news is that we have got this bipartisan action that's built a bridge to the other side, but there's still going to be a heck of a lot of other problems that pop up, he said.

Both the International Monetary Fund and the World Bank have said that the US economy is in recession. More than 27 million Americans have applied for unemployment benefits as they have been laid off due to coronavirus pandemic that has resulted in more than 95 per cent of the country's 330 million population under stay-at-home order.

The Trump Administration has come out with massive stimulus package to boost the economy. We have got this black swan of this event where we have actually had to shut everything down, he said.

"The interesting thing is that more or less because of the legislation that's been passed on a bipartisan basis, we haven't seen 50 other black swans, ...the markets have been relatively stable, and the people are getting their money, and the firms aren't declaring bankruptcy at a rate that you might expect, he said.

So, I think that we have so far kind of dodged a bullet with that. It means that I think markets are hopeful that we could get the V-shaped recovery that the president is hoping for, he asserted.

But make no mistake: it's a really grave situation.. This is the biggest negative shock that our economy, I think, has ever seen. We're going to be looking at an unemployment rate that approaches rates that we saw during the Great Depression, Hassett said.

During the financial crisis around 2008, the US lost 8.7 million jobs. Right now, the US is losing that many jobs about every ten days, he said.

Responding to a question, he said that the debt level in the US has climbed up to the point where in the economics literature, it can be a sort of long run negative for growth. And so, for me, I think that as we go into the next phase of legislation, we need to think about long run things that we can do to try to get ahead of the curve on debt, he said.

"For sure we need to do still some short run things but I think looking at long run changes that we can make to things to improve the debt situation, you know, that should be something that should be on the table, Hassett added.