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July 2, 2020 3:45 PM, EDT

CBO Trims GDP Forecast for 2020, Lifts 2021 Projection

A woman wearing a mask walks through a San Diego outlet mall on May 26.A woman wearing a mask walks through a San Diego outlet mall on May 26. (Gregory Bull/Associated Press)

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The U.S. economy will see a slightly deeper contraction this year but a bigger rebound in 2021 than previously forecast, according to updated estimates from the Congressional Budget Office.

The nonpartisan agency’s latest economic projections on July 2 showed gross domestic product will shrink 5.9% in 2020 and grow 4.8% next year on a fourth-quarter-to-fourth-quarter basis. In its May 19 estimate, the CBO had projected a 5.6% decline this year and growth of 4.2% in 2021.

The agency said it expects slightly more improvement in the job market this year and next, though it will remain much weaker than it was prior to the coronavirus pandemic. The unemployment rate is seen averaging 10.6% this year and 8.4% in 2021, better than prior forecasts of 11.5% and 9.3%, respectively.

The forecasts incorporate information available as of June 26, before the stronger-than-expected job gains reported earlier July 2.

The effects of the pandemic-related lockdowns on the economy will linger for years to come, particularly for those just entering or new to the labor market. The CBO sees unemployment averaging 6.3% in 2023-2024, with GDP growth rates averaging 2.2%.

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