MADISON, Wis.–It’s going to be a cold winter for the economy, according to one CUNA economist, although the federal government might be able to add a little warmth.
Jordan van Rijn, senior economist with CUNA, said a worsening of the COVID-19 pandemic and as many as 2,000 deaths per day in the coming months is going to lead to a “lot of pullback in the economy.”
While promising vaccines are on the horizon, van Rijn noted those are not expected to be widely available until mid-2021. He added CUNA expects there could be a new stimulus package from the federal government, albeit smaller than earlier packages and in the range of $1 trillion to $1.5 trillion, and likely not passed until January or February.
“With the economy, so far things have gone slightly better than predicted,” said van Rijn. “A few months ago many of the forecasts were very negative. But the unemployment rate dropped to 6.9% in October, which is still twice as high as what we had earlier in the year. We did see strong growth in Q3, although growth is still down for year.”
Similar to a forecast from CUNA Mutual that was released last week as part of its Trends Report, van Rijn said there is still a “good chance the economy could see a double-dip recession in 2021.
‘Some Warning Signs’
“We are already seeing some warning signs in the data, such as increase in weekly
unemployment claims. We think unemployment might rise to 7% by the end of year,” he said. “We expect the economy to grow, but at a much slower pace, around 4% annualized. We expect loan growth in the fourth quarter to be 2%, and membership growth of .7%. We expect loan growth to be 6% for 2020 and for 2021, as well.”
van Rijn said one bright spot in the numbers comes with a caveat: delinquencies have continued to fall, but it’s largely due to loan modifications and forbearances, many of which are coming to an end. He said CUNA is projecting delinquencies of 1% for 2020 and 1.1% for 2021.
CUNA is also projecting credit union earnings will fall to 35BPs in Q4 and 35 BPs in 2021 next year, as well.