US suffers economic blow as GDP sinks by annual rate of 32.9 percent
The US economy suffered its worst blow since the Great Depression in the second quarter as the coronavirus crisis slowed the country to a crawl, the feds said Thursday.
The nation’s gross domestic product — the value of all goods and services produced here — was 9.5 percent smaller in the second quarter than in the first, according to the US Commerce Department — a heart-stopping plunge that’s unmatched in historical data from the National Bureau of Economic Research going back to 1875.
The most recent period that came anywhere close was a roughly 7.2 percent contraction in the last quarter of 1937, in the late stages of the Great Depression, according to the data noted by The Washington Post.
Compared with the year-earlier quarter, the nation’s GDP plunged 32.9 percent during the three months ended in June, by far the largest drop since the government started tracking the figures in 1947. That drop more than tripled the previous record of 10 percent seen in the second quarter of 1958, and added to a 5-percent contraction seen in the first three months of the year, when the virus spread from China across the world.
The worst of the economic collapse has likely passed given that states are no longer locked down as they were in the spring. But the recent surge in COVID-19 cases has complicated the nascent recovery, experts say.
“I think this number … marks the end of the recession, but the recovery by no means will be fast,” Yelena Shulyatyeva, senior US economist at Bloomberg Economics, said of the annualized drop. “It will be protracted and it will be a long and bumpy road ahead.”
Every sector of the economy except federal government spending suffered a contraction last quarter — including consumer spending, which plummeted at a 34.6 percent annual rate.
Most of the drop in activity came in April as officials across the country shuttered non-essential businesses and ordered people to stay home as much as possible. The layoffs that resulted drove the unemployment rate to a record 14.7 percent that month.
“Even if it were to rebound at a double-digit pace in the third quarter, which is what we are hoping, you still get nowhere near to where we were,” Diane Swonk, chief economist at Grant Thornton and a Federal Reserve adviser, said of the latest GDP numbers.
Several states began to lift lockdowns in May and June, leading to a significant rebound in employment and consumer spending. Congress also helped stave off a more dire collapse by approving nearly $3 trillion in stimulus spending, including forgivable loans to small businesses, direct payments to taxpayers and expanded unemployment benefits.
“The question is how much of the rebound in May in June is simply pent-up demand from consumers who had been issued stay-at-home orders and then they were let out again,” Chris Rupkey, chief financial economist at MUFG Union Bank, told The Post. “So we don’t know if it’s going to continue.”
The threat of the virus continues to weigh on economic activity as many states grapple with spikes in infections. Moreover, the fiscal aid approved in the spring is starting to run dry and federal lawmakers are reportedly deadlocked on a new spending package.
Congress “hoped it was a transitory event,” Swonk said. “It’s much more persistent and I think it’s important to acknowledge how large of a shock this is.”
With Post wires