The government also announced on Thursday that the unemployment rate rose again to 1.4 million last week, with further signs of any recovery coming to a halt.
According to the Bureau of Economic Analysis, the agency that publishes quarterly economic activity statistics, GDP fell by 32.9% year on year. Although it usually emphasizes annualized rates, this figure is less useful this quarter because the economy is unlikely to collapse further than it did in the second quarter.
Although the tail frequency is unlikely to be unlikely in the second quarter, the emerging recovery that began earlier this summer appears to be at risk.
On Wednesday, Federal Reserve Chairman Jerome H. Powell warned that the latest rise in infections is beginning to affect the economy, while re-emphasizing recovery cannot be sustained unless the virus is under control.
“We̵7;re still digging out of a hole, a really deep hole,” said Ben Herzon, IHS CEO Markit. “The number in the second quarter just tells us the size of the hole we’re digging out, and it’s big.”
The Thursday report offered another economic picture of how people stay at home, reducing their spending and revising their normal practices. In the second quarter, there was a significant decline in sales of clothing, footwear and petrol, along with food, healthcare and transportation services.
At the same time, real disposable personal income increased by almost 10 percent, mainly due to direct stimulus controls and increased unemployment benefits under the Care Act. Car sales increased along with recreational goods and vehicles. Services in housing and public services, as well as in agricultural inventories, have increased.
According to historical data created by economists Nathan Balk and Robert Gordon, it was the worst quarter since 1875. Runners are the third quarter of 1893, when legendary panic and running ashore caused a crippling depression, and the fourth quarter of 1937, when the Great Depression returned with revenge. In these quarters, there was a decrease of 8.4%, resp. 7.2%.
So far, the modern era of GDP measurement, which began in 1947, has not 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.”
The activities of legislators can be a key factor in the economic recovery.
Congress is divided into another round of incentives, including whether to extend extended unemployment benefits, which would otherwise end on Friday. In California, Arizona, Texas, Florida and Michigan, intense outbreaks have forced authorities to call back their reopening plans and restrict business activity again.
Demands for unemployed work have risen for the second week in a row, raising concerns about how much of the workforce remains vulnerable as increased unemployment benefits expire.
GDP figures show how serious the economy has suffered and been able to “throw congress into action” to be issued by August, said Wendy Edelberg, Hamilton project director and head of economic studies at the Brookings Institution.
“One thing that policy makers and all readers of this report can take is that we want to avoid this result,” Edelberg said. “We want to avoid having to go through such a dramatic shutdown again, because that’s the pain it causes.”
Sung Won Sohn, a professor of finance and economics at Loyola Marymount University and president of SS Economics, said all Y, W or U-shaped recovery talks refer to “Y” or “sideways” expansion.
“The pandemic brought winners (top Y sideways) and losers (bottom Y sideways) widening the economic divide in the economy,” Sohn wrote in an analytical note Thursday morning.
The economy collapsed in April due to a nationwide shutdown. In that month, the unemployment rate rose to its highest level since the Great Depression. Retail sales fell 16.4 percent in April, the largest record decline.
In May, large companies began bidding for bankruptcy, including retailer JC Penney and car rental company Hertz. At the same time, states have begun to ease restrictions on assemblies and businesses and are fueling new hopes for a surprising turnaround. The May unemployment rate fell as the labor market rose again and retail sales reached 17.7%. President Trump and other White House officials said the nation was on track for a V-shaped recovery, although the Federal Reserve stressed that virus control was key to a lasting turnaround.
The economy added a record number of jobs in June, when the workforce recovered from about 1 in 3 jobs lost during the crisis. However, measurements for the June report were made when the wave of coronavirus cases in the United States was low – 35 countries recorded new infection records only in July.
There are new signs that the economic recovery is slowing down, and Powell, the country’s chief economist, has noted that growing cases of coronaviruses are beginning to have a serious impact on the economy. Powell said on Wednesday that some measures concerning consumer spending on the use of debit and credit cards had been reduced in the last month. According to him, hotel accommodation fees have flattened and Americans do not go to restaurants, gas stations and beauty salons as they did earlier in the summer.
“Overall, the data appears to point to a slowdown in the pace of recovery,” Powell said at a news conference on Wednesday. “I want to emphasize that it is too early to say how big it will be and how permanent it will be.”
Kelly Lightfoot, 50, has been running Happy Kids Maui for more than two decades. In good times, he leads “100 miles per hour” and manages the administrative staff and between 50 and 80 babysitters who follow the children of holiday tourists on the three islands.
But in March, the governor of Hawaii locked the state and adopted a strict quarantine that stopped the flow of visitors from the mainland.
The store stopped squeaking and said, “It was our spring break. We had huge, huge reservations for March, April, May – I had to return all that money. “
A recent analysis by Yelp found that Hawaii was hit harder by coronavirus-related business closures more severely than any other state. Lightfoot said it reduced its spending during the blockade. All the disbursements and expenses she would have spent on the island economy between March and September were successful. However, it still pays two administrative staff because it is determined to reopen and cannot afford to lose skilled staff.
“We’ve been too long to just throw in the towel,” Lightfoot said. “I started from almost nothing. I’m sure I can do the same thing again. “
Beth Ann Bovino, a leading American economist at Standard & Poor’s Global Ratings Services, compared the massive shock of GDP with the economy as a “cardiac arrest.” But not all Americans felt the same sharp, deep shock the same way.
“If you cut it all evenly, we’d all be given a piece,” Bovino said. “It simply came to our notice then. There are many people who are in much worse situations than others. “
The Ministry of Commerce’s GDP data is undergoing several revisions, even in normal periods. Now a pandemic only increases uncertainty in the process. Constance Hunter, KPMG’s chief economist, said later adjustments would help clarify, for example, what happened to imports and exports.
With so many questions hanging over the economy, quick data on restaurant closures, pedestrian traffic, and even doctor’s visits will help fill a 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 dubbed “FOGO” or “fear of going out.” This breakup will be key to understanding when people will feel comfortable returning to their pre-pandemic routines. “And covid is going to take the bus,” she said.