(PresidentialWire.com)- The United States economy experienced the worst drop in history in the second quarter of 2020.
According to a Bureau of Economic Analysis report, the economy contracted at an annual rate of 32.9% between April and June, which officially put the U.S. into a recession. A recession is defined most commonly as a drop in gross domestic product for two straight quarters. In the first quarter of this year, the GDP dropped by an annualized rate of 5%.
The drop in GDP for the second quarter was almost four times worse than what it was at the peak of the financial crisis. In the fourth quarter of 2008, the economy contracted “only” 8.4%.
During the Great Depression, the economy contracted almost 13%. But it’s truly difficult to compared apples-to-apples between then and now because quarterly GDP records weren’t recorded until 1947.
In April alone, more than 20 million jobs in the country were lost due to businesses being forced to close as the result of stay-at-home orders. That caused unemployment claims to skyrocket to levels never before seen.
Despite two months of decent gains in the job market as states began to re-open their economies, the U.S. as a whole has still lost 15 million jobs since February. Economists expect July’s jobs report, which is due out next week, to show roughly 2.3 million jobs added to the economy. While that would bring the unemployment rate down to 10.3%, it would still mark a level higher than at any point during the financial crisis.
That trend in the right direction may seem positive, but the activity in the last few weeks might be showing that we’re in for another rough period. For the second week in a row, first-time unemployment claims rose last week. After 16 weeks of decline, claims increased last week as 1.4 million people filed for the benefits for the first time.
The jobs report is a trailing measure, as stats are only collected through the middle of the month. That would mean the last two weeks of increased unemployment claims won’t be reflected until the August jobs report.
As coronavirus cases continue to surge in many parts of the country, there is also a worry that more states could institute stay-at-home orders once again. That could have disastrous effects on the economy, particularly small businesses that have struggled to get by as it is.
On Wednesday, Jerome Powell, the chair of the Federal Reserve, announced the central bank would “do what we can, and for as long as it takes,” to try to limit economic damage and boost economic growth.
“It looks like the data are pointing to a slowing in the pace of the recovery,” he said, adding that the U.S. “has entered a new phase in containing the virus, which is essential to protect both our health and our economy.”
And as the Federal Open Market Committee, which is the policy-setting arm of the central bank, said in a statement:
“The path of the economy will depend significantly on the course of the virus.”