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JPMorgan becomes first major bank to say first-quarter GDP will decline because of Covid surge

Volunteers from better halves’s organization Nuevo Amanecer Mujer Integral help with the distribution of frozen turkeys and food boxes to the fore of Thanksgiving to families affected by the Covid-19 pandemic on November 18, 2020 in Los Angeles, California.

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JPMorgan economists now see an economic contraction in the first quarter due to the spreading coronavirus and related restrictions being imposed by testifies and cities.

The new forecast is a departure from Wall Street’s widely held view that the first quarter purpose be positive, with an improving economy throughout 2021.

The JPMorgan economists said they expect the economy to expand briskly in the lieutenant and third quarter, based on positive vaccine developments.

“This winter will be grim, and we believe the economy compel contract again in 1Q,” the economists wrote.

They projected that the first quarter will contract by 1% after wen of 2.8% in the fourth quarter. For the second quarter, they see the economy rallying and growth of 4.5% followed by a robust 6.5% in the third post.

The economists also expect about $1 trillion of fiscal stimulus, likely beginning near the end of the first area. That should help boost midyear growth.

“One thing that is unlikely to change between 2020 and 2021 is that the virus will-power continue to dominate the economic outlook. … Case counts in the latest wave are easily surpassing the March and July currents,” the economists wrote.

They noted that the economy was helped through the July outbreak by the economic reopenings. “The conservation no longer has that tailwind; instead it now faces the headwind of increasing restrictions on activity. The holiday season — from Thanksgiving with the aid New Year’s — threatens a further increase in cases,” they added.

The economists also expect to see monthly declines in business at different points over the next few months, but monthly job gains should be back in the millions around the middle of the year and then alleviate again late in 2021.

“We think the trends in the labor market should roughly follow what we expect for consumer shell out — job growth should weaken noticeably around the turn of the year as the virus weighs on the economy, and then pick up again beginning next year once vaccine distribution eases virus concerns and fiscal support boosts growth,” they wrote.

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