On Thursday, the government also said that last week the claims of the unemployed rose again to 1.4 million, which is another sign of the cessation of recovery.
According to the Bureau of Economic Analysis, an agency that publishes quarterly economic activity statistics, GDP has shrunk by 32.9 percent annually. Although this usually underscores the annual rate, this figure is less useful this quarter, as the economy is unlikely to collapse other than in the second quarter.
However, although the hairpin in the second quarter is unlikely, recovery, which began to appear earlier this summer, is in jeopardy.
On Wednesday, Federal Reserve Chairman Jerome H. Powell warned that the latest outbreak of infections had begun to gain weight in the economy, while a resurgence of recovery could not be sustained if the virus was not controlled.
“We̵7;re still digging a hole, really a deep hole,” said Ben Gerson, CEO of IHS Markit. “The figure of the second quarter will simply tell us the size of the hole we are digging, and it is large.”
Thursday’s report offered another economic snapshot of people staying at home, cutting costs and repairing their routines. In the second quarter, there were significant declines in sales of clothing, footwear and gasoline, as well as food services, health care and transportation services.
At the same time, real disposable personal income increased by almost 10 percent, mainly due to direct verification of incentives and increases in unemployment benefits under the Care Act. Car sales increased along with recreational goods and vehicles. Housing and communal services have grown, as have household stocks.
It was the worst quarter, at least since 1875, according to historical data sets created by economists Nathan Balke and Robert Gordon. They ran in the third quarter of 1893, when the legendary panic and running along the shores caused a crippled depression, and the fourth quarter of 1937, when the Great Depression returned with revenge. These quarters decreased by 8.4% and 7.2%, respectively.
So far, no quarter of the modern era of GDP measurement, which began in 1947, has seen a decline of even 3 percent. The worst was 2.6 percent in 1958 amid a depression that coincided with a devastating pandemic known as the “Asian flu.”
What legislators can do can be a key factor in economic recovery.
Congress is divided into another round of incentives, including whether to continue raising unemployment benefits, which would otherwise end on Friday. In California, Arizona, Texas, Florida and Michigan, escalating outbreaks have forced the authorities to resume their recovery plans and restrict business activity.
Unemployment claims are rising for the second week in a row, adding to concerns about how vulnerable a significant part of the workforce remains as unemployment benefits end.
GDP data show how much the economy has been affected and can “put Congress into action” since August, said Wendy Edelberg, director of the Hamilton project and a senior researcher at the Brookings Institution.
“One of the things we can take on this issue for politicians and all of us readers of this report is the result we want to avoid,” Edelberg said. “We want to avoid having to go through such a dramatic shutdown again because it’s the pain it causes.”
To all talk of a V, W or U recovery, Sun Won Son, a professor of finance and economics at Loyola Marymoon University and president of SS Economics, said the “Y” and “side” expansion is now underway.
“The pandemic created winners (upper side Y sideways) and lost (lower part Y sideways), widening the economic divide in the economy,” Son wrote in an analyst note.
In April, the economy fell into disrepair. Unemployment rose to its highest level since the Great Depression that month. In April, retail sales fell 16.4 percent, the biggest drop.
In May, large companies began filing for bankruptcy, including retailer JC Penney and car rental company Hertz. At the same time, states have begun lifting restrictions on fees and business, sparking new hopes for a surprising turnaround. Unemployment fell in May as the labor market rose and retail sales rose 17.7%. President Trump and other White House officials have said the nation is moving toward a V-type recovery, even as the Federal Reserve has stressed that controlling the virus is key to a constant turnaround.
The economy added a record number of jobs in June as the labor force regained about a third of the jobs lost during the crisis. But measurements for the report were made in June, when the wave of coronavirus cases was low in the United States – only on July 35 set new records of infection.
New signs of a failing economic recovery have emerged, and Federal Reserve Chairman Jerome H. Powell said growing cases of coronavirus are beginning to weigh on the economy. On Wednesday, Powell said some consumer spending measures based on debit and credit cards have declined over the past month. Hotel occupancy rates have dropped, Powell said, and Americans do not visit restaurants, gas stations and beauty salons as much as they did earlier in the summer.
“Overall, the data seem to indicate a slowdown in the recovery,” Powell told a news conference on Wednesday. “I want to emphasize that it is too early to talk about how big it is and how sustainable it will be.”
Kelly Lightfoot, 50, has been managing Happy Kids Maui childcare for more than two decades. In good times, she travels “100 miles per hour”, managing office workers and between 50 and 80 nannies who watch the children of vacationers on the three islands.
But in March, the governor of Hawaii closed the state and adopted a strict quarantine, which almost did not stop the influx of visitors from the mainland.
Business stopped, and she said, “It was our spring break. We had big, giant bookings for March, April, May – I had to get all that money back.”
A recent Yelp analysis found that Hawaii had suffered a stronger closure of its coronavirus business than any other state. Lightfoot said it reduced its closing costs. All the wages and expenses she would have invested in the island’s economy between March and September were gone forever. But it still pays two office workers because it is set up to reopen and cannot afford to lose skilled workers.
“We’ve been too long to just throw in the towel,” Lightfoot said. “I started with almost nothing. I’m sure I can do the same thing again. “
Beth Ann Bovino, chief US economist at Global & Rating’s Services, described large-scale GDP for the economy as a “cardiac arrest”. But even such a sharp, deep shock was not felt equally by all Americans.
“If you cut everything evenly, we would get a certain rink,” Bovino said. “But it doesn’t work that way. There are a lot of people who find themselves in much worse situations than others.”
The GDP data of the Department of Commerce are revised even at normal times. Now the pandemic is only exacerbating the uncertainty in the process. Constance Hunter, KPMG’s chief economist, said the changes would help clarify what had happened, for example, to imports and exports.
Because there are so many issues related to the economy, quick data on restaurant closures, leg movements, and even doctor visits will help fill in the blurry picture of what’s happening across the country, Hunter said.
She said it was more useful to think about economic activity during a pandemic in what she called “FOGO” or “fear of getting out.” This indicator will be key to understanding when people feel comfortable when resting back to their pre-pandemic procedures. “And the covid is going to take a bus on it,” she said.