James Bullard, the president of Federal Reserve Bank of St. Louis has predicted that US unemployment rate could hit 30% in the second quarter owing to shutdowns due to the coronavirus, with an unprecedented 50% drop in GDP.

He also suggested that such a thing would result in a $2.5 trillion loss in income, and only a huge stimulus could make up for it, Bloomberg News reported on Sunday. US Treasury Secretary Steve Mnuchin told GOP senators in a private meeting last week that possibly, unemployment could reach 20 percent, clarifying later that he was not making an estimate.

Recession
Recession Pixabay

Senate didn't move the stimulus package

The US Senate on Sunday failed to move forward on the third coronavirus bill that proposed stimulus package, as Democrats rejected it. The legislation proposed was to provide cash payments to individuals and families along with financial assistance for small businesses and corporations. This also includes billions of dollars to hospitals and also to boost unemployment benefits, said reports.

Democrats had argued before that not enough benefits would reach workers and families who are most in need. Six senators were absent from the vote that included Kentucky Republican Rand Paul, who tested positive for the coronavirus, while four other Republicans were in self-quarantine.

Point toward a recession

Bullard said that the package should be such that it would lead to the third quarter being a "transitional quarter" and the fourth quarter and first quarter of next year as a potential "boom quarters," adding that Government's priority should be to help American workers and businesses.

Bullard's comments follow the worst stocks week since 2008, with massive drops in the Dow Jones Industrial Average, said the report.

According to The Atlantic's Annie Lowrey too, unemployment rate of US could rise to a huge 20% as an aftermath of the COVID-19 pandemic. Connecticut residents filed a huge 30,000 jobless claim in mid-March, compared to the weekly average of 3,000.

Goldman Sachs also predicted that jobless claims could spike to 2.25 million in the last week itself that would almost triple the record set in 1982. The Goldman economists earlier said that "even the most conservative assumptions suggest that initial jobless claims are likely to total over 1 million."