The U.S. economy’s contraction in the second quarter was the worst on record.
Economic output fell at its fastest pace on record last spring as the coronavirus pandemic forced businesses across the United States to close their doors and kept millions of Americans shut in their homes for weeks.
Gross domestic product – the broadest measure of goods and services produced – fell 9.5 per cent in the second quarter of the year, the Commerce Department said Thursday. On an annualized basis, the standard way of reporting quarterly economic data, GDP fell at a rate of 32.9 per cent.
The collapse was unprecedented in its speed and breathtaking in its severity. The only possible comparisons in modern American history came during the Great Depression and the demobilization after the Second World War, both of which occurred before the advent of modern economic statistics.
Unlike past recessions, this one was a result of a conscious decision to suspend economic activity to slow the spread of the virus. Congress pumped trillions of dollars into the economy to sustain households and businesses, limit long-term damage and allow for a rapid rebound.
The plan worked at first. In recent weeks, however, cases have surged in much of the country. Data from public and private sources indicate a pullback in economic activity, reflecting consumer unease and renewed shutdowns.
“In another world, a sharp drop in activity would have been just a good, necessary blip while we addressed the virus,” said Heather Boushey, president of the Washington Center for Equitable Growth, a progressive think tank. “From where we sit in July, we know that this wasn’t just a short-term blip.”
1.43 million filed new state unemployment claims last week.
The number of Americans filing new claims for state unemployment benefits totalled 1.43 million last week, the Labour Department reported Thursday.
It was the 19th straight week that the tally exceeded one million, an unheard-of figure before the coronavirus pandemic. And it was the second weekly increase in a row after nearly four months of declines, a sign of how the rebound in cases has undercut the economy’s nascent recovery. Claims for the previous week totalled 1.42 million.
New claims for Pandemic Unemployment Assistance, the government’s program aimed at covering freelancers, the self-employed and other workers not covered by traditional unemployment benefits, totalled 830,000, down from 975,000 the week before. Those numbers, unlike the figures for state claims, are not seasonally adjusted.
“We’re still in a desperate situation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago. Pointing out that weekly claims were in the 200,000 range before the pandemic brought widespread shutdowns in March, she added, “This is unique in terms of the speed and magnitude of the job losses.”
What’s more, fears are growing that after rebounding strongly in May and June, the economy has run out of steam, with many states reversing the reopening of businesses.
“Everyone wants to keep putting on rose-coloured glasses, but it’s blinding us to the reality of the situation and what we have to deal with,” Ms. Swonk said.
At the same time, the US$600 supplemental weekly unemployment payment from the federal government is ending, a potentially crippling financial blow to millions. Republicans have proposed replacing the supplement with a US$200 weekly payment, while Democrats want to extend it in full. “We’re nowhere close to a deal,” Mark Meadows, the White House chief of staff, said Wednesday.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
This content appears as provided to The Globe by the originating wire service. It has not been edited by Globe staff.