The economic picture painted by a double dose of economic statistics released Thursday reveals a US economy struggling to escape the grip of the coronavirus.
Record drop in real output. The Commerce Department’s Bureau of Economic Analysis reported that U.S. real gross domestic product fell 9.5 percent in the second quarter when compared to the previous quarter, representing a 32.9 percent decline on an annualized basis (a measure of how much the economy would contract if the second quarter decline persisted for an entire year) – the steepest declines in more than 70 years.
According to the BEA, second quarter data reflect the impact of state-imposed lockdowns in March and April, which triggered steep drops in consumer spending, exports, business investment, and spending at the state and local level as tax collections plummeted. Consumer spending fell 10 percent from the previous quarter (or 34.6% on an annualized basis) amid sharp decreases in spending on services like health care, recreation, and food.
Business investment in software, research and development, equipment and structures fell 8.5 percent (a 27% annual rate). Spending by the federal government actually rose as it paid out fiscal stimulus checks and supplemental unemployment benefits attributable to enactment of the CARES Act.
As some states lifted restrictions in May and June, BEA says economic growth rebounded, but a resurgence of cases this summer may prove that bounce short-lived.
Unemployment claims rise again. The Labor Department released data on initial unemployment claims for the week ending July 25. The number of first claims rose a seasonally adjusted 12,000, from 1,422,000 to 1,434,000. It was the 19th straight week in which initial claims totaled at least 1 million and the second consecutive week in which initial claims rose after declining for 15 straight weeks. Moreover, the number of Americans receiving unemployment benefits rose by 867,000 for the week ending July 18 following several weeks of decline. Currently, over 30 million people claim some form of unemployment insurance.
Adding to economic uncertainty, the $600 per week supplemental pandemic unemployment insurance benefit enacted as part of the CARES Act expires July 30. Without Congressional action, many jobless workers will see their incomes drop precipitously.