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JPMorgan's New York headquarters. Photo: Erik McGregor/LightRocket via Getty Images

JPMorgan says the economy will shrink by an annualized 1% next quarter, adding to a growing number of firms trimming estimates as the coronavirus rages.

Why it matters: It's the first major Wall Street bank that expects the economy will contract again as a result of the pandemic.

What they're saying: “This winter will be grim, and we believe the economy will contract again in 1Q,” JPMorgan economists wrote.

  • The economy "now faces the headwind of increasing restrictions on activity. The holiday season — from Thanksgiving through New Year’s — threatens a further increase in cases," they said.
  • JPMorgan says economic growth in the the second and third quarters of 2021 will be an annualized 4.5% and 6.5% respectively.
  • This quarter, it expects the economy to grow 2.8% on an annulled basis.

The big picture: Others on Wall Street are ratcheting down estimates for economic growth, in the wake of the coronavirus wave and tightened restrictions.

Economists at Goldman Sachs downgraded forecasts for Q4 and Q1 2021 to an annualized 3.5% and 1.0%, respectively, from 4.5% and 3.5%. They cited the "rapid and broad-based resurgence of the coronavirus."

  • But it upped growth estimates for later next year, saying "the larger drag in the winter should imply an even larger reaccelerating on the back of mass immunization."

Barclays says it expects economic growth to be flat in Q1 2021, vs. its previous expectation of 3% annualized growth, as restriction measures "weigh on service activity in the coming months."

  • It still expects the economy will grow at a 5% annualized pace this quarter.

Go deeper

Jan 27, 2021 - Technology

Facebook stock whipsaws amid ad targeting concerns

Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images

Facebook's stock showed volatility in after-hours trading Wednesday, despite adding users and beating on top and bottom lines.

Why it matters: Investors seem spooked by proposed changes to user data collection by Apple that would impact Facebook's ad business, in addition to perennial threats of new federal privacy regulations.

Rahm Emanuel questioned on murder of Laquan McDonald in confirmation hearing

Rahm Emanuel during a Senate Foreign Relations Committee confirmation hearing on Oct. 20. Photo: Sarah Silbiger/Bloomberg via Getty Images

Former Chicago Mayor Rahm Emanuel spoke about the murder of Laquan McDonald during his Senate confirmation hearing Wednesday to become the U.S. ambassador to Japan, saying that "there's not a day or a week that has gone by in the last seven years I haven't thought about this."

Catch up quick: McDonald was a Black teenager who was fatally shot 16 times by Chicago police during Emanuel's tenure as the city's mayor. The 2014 shooting triggered massive protests, both because of its nature and the fact that the officers' body-cam footage was concealed for years.

2 hours ago - World

Biden's ambassador nominee: "China is not an Olympian power"

Nick Burns testifying before the Senate Foreign Relations Committee. Photo: Sarah Silbiger/Bloomberg via Getty Images

President Biden's nominee to serve as ambassador to China delivered a stark assessment of the challenges the U.S. faces in confronting Beijing, but stressed that the rising superpower is "not all-powerful" and the West retains "substantial" advantages.

The big picture: Nicholas Burns, a retired career diplomat and former U.S. ambassador to NATO, used his confirmation hearing Wednesday to echo the growing bipartisan consensus that China poses "the greatest threat to the security of our country and the democratic world" in the 21st century.