GDP fell by a third: the US economy is experiencing the largest recession

The US economy suffered its worst hit since the Great Depression in the second quarter of 2020 as the coronavirus crisis slowed the country's economic growth, federal officials said on Thursday, July 30. New York Post.

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The nation's gross domestic product - the value of all goods and services produced - was 9,5% smaller in the second quarter than in the first, a staggering jump based on historical data from the National Bureau of Economic Research going back to 1875, according to the U.S. Commerce Department.

According to the latest data from The Washington Post, the last period of similar decline occurred in the last quarter of 1937, during the late stages of the Great Depression, when the decline was approximately 7,2%.

Compared to the previous quarter, the country's GDP fell 32,9% in the three months ended June, the biggest drop since the government began tracking numbers in 1947. The drop more than tripled the previous record of 10% seen in the second quarter of 1958, and added to the 5% decline in the first three months of 2020, when the virus spread from China around the world.

The record drop came despite the fact that the states are no longer closed as they did in the spring. But the recent spike in COVID-19 cases has complicated the incipient economic recovery, experts say.

“I think this number... marks the end of the recession, but the recovery will by no means be quick,” said Elena Shulatyeva, senior economist at Bloomberg Economics. “It’s going to be protracted and there’s a long, bumpy road ahead.”

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Every sector of the economy except for federal government spending contracted last quarter, including consumer spending, which fell 34,6% y / y.

Much of the slump occurred in April, when officials across the country closed nonessential businesses and ordered people to stay at home as long as possible. The layoffs saw the unemployment rate hit a record 14,7% in the same month.

“Even if the third quarter recovery accelerates at double digits, as we hope for, we will still be nowhere near where we were,” said Diane Swank, chief economist at Grant Thornton and Federal Reserve adviser.

Several states began lifting locks in May and June, leading to significant increases in employment and consumer spending. Congress helped stave off a worse collapse, among other things, by approving nearly $ 3 trillion in stimulus spending, including soft loans for small businesses, direct payments to taxpayers and extended unemployment benefits.

“The question is how much of the May-June recovery is simply a result of pent-up demand from consumers coming out of lockdown,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “So we don’t know if this will continue.”

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The virus threat continues to weigh on economic activity as many states face surges in infections. In addition, bailouts approved in the spring are starting to dwindle and federal lawmakers are reportedly deadlocked over a new spending package.

“Congress hoped this would be a passing event,” Swank explained. “I think it’s important to acknowledge how big the shock is.”

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