Bank of America (NYSE:BAC) warned investors on Thursday that a coronavirus-induced recession is no longer avoidable — it’s already making its presence felt.
According to bank economist Michelle Meyer, "We are officially declaring that the economy has fallen into a recession ... joining the rest of the world, and it is a deep plunge. Jobs will be lost, wealth will be destroyed and confidence depressed.”
The firm expects the economy to "collapse" in the second quarter, shrinking by 12%. For 2020, the firm expects Gross Domestic Product to contract by 0.8%.
Bank of America looked at the labour market as a way to understand the "magnitude of the economic shock." The firm expects the unemployment rate to nearly double, with roughly one million jobs lost each month of the second quarter for a total of 3.5 million.
Stock markets the world over have tanked. And Bank of America said it’s only going to get worse. The firm sees a trough in April, followed by a "very slow return to growth thereafter with the economy feeling somewhat more normal by July. Although the decline is severe, we believe it will be fairly short-lived."
As the economy continues to face uncharted territory, Meyer said "salvation" will come from aggressive action. "When it comes to the policy response, there should be no upper bound for the size of stimulus."
