Coronavirus could ‘drag on US economy for a decade’

The drag on the US economy from the virus pandemic will last almost a decade, according to projections by the Congressional Budget Office (CBO).

It forecasts the outbreak will cut US economic output by 3% between this year and 2030, a loss of $7.9tn (£6.3tn).

The warning comes as tens of millions of people are out of work due to lockdown measures.

America’s historic downturn comes even after trillions of dollars have been pumped into the economy.

The nonpartisan CBO said the majority of the loss was caused by the sharp contraction in economic activity this year, which it had not predicted in its last 10-year report, published in January.

“Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce US investment in the energy sector,” CBO director Phillip Swagel wrote in response to an inquiry from Senate Minority Leader Charles Schumer.

“Recent legislation will, in CBO’s assessment, partially mitigate the deterioration in economic conditions,” he added.

Since the virus pandemic hit the US the government and the central bank have provided trillions of dollars of support for the world’s biggest economy.

Still, unemployment has soared to levels not seen since the Great Depression of the 1930s as more than 40 million Americans have already been put out of work.

America’s unemployment rate hit 14.7% in April and on Friday the US Labor Department is expected to confirm that it reached 20% in May. In March that figure stood at just 4.4% having risen from a 50-year low from the month before.

There is an ongoing debate in the US Congress over a new $3tn a new stimulus plan as well as a proposal to renew several federal aid programmes that would otherwise lapse, including a temporary increase to jobless benefits that is set to expire in July.

The CBO is a federal agency within the US government that provides budget and economic information to Congress.