The U.S. has failed to contain the COVID-19 virus, alone among developed economies, and will suffer the economic consequences, Goldman Sachs economists said in a report issued on Independence Day.
“Over the last few weeks, the covid situation in the U.S. has worsened significantly to the point where the US is now a notable outlier among advanced economies,” the report said. “Other advanced economies show that it is clearly feasible to resume economic life to or beyond current US levels without triggering a spike in virus cases.”
Instead, the virus in the U.S. is spiralling out of control, the report said. In part, it blamed the lack of national leadership – what it called a “bottom-up approach.” The resultant pull-back in consumer spending, which accounts for about three-quarters of U.S. GDP, will likely cause job losses and a steeper recession than expected, the economists said.
“The U.S. took a more bottom-up approach to reopening than most countries, with policy set mostly at the state and city level, and there were bound to be setbacks in at least a few parts of the country as the economy reopened,” the report said.
The resurgence in the pandemic has “already been much worse than we anticipated, and further restrictions will likely be required in some states to bring the virus under control,” the economists said.
Goldman Sachs revised its 2020 GDP forecast to -4.6% on a full-year basis, compared with -4.2% in its previous estimate.
In the past two weeks, states representing about 60% of the U.S. population have responded to the worsening virus situation by pausing or reversing their reopening plans, the report said.
Only three U.S. states currently meet the four criteria for reopening set by the Centers for Disease Control and Prevention, the report said, without naming them. In the last week, Florida, Texas, and California have tightened restrictions, with measures including closing bars and limiting restaurant occupancy, the economists said.
“Bringing the virus under control is likely to take some time, and national consumer activity is unlikely to pick back up until that happens,” the report said.