An American Economic Collapse Has Just Wiped Out 5 Years of Growth!

Dear Commons Community,

The coronavirus pandemic’s toll on the nation’s economy became emphatically clearer yesterday as the government detailed the most devastating three-month collapse on record, which wiped away nearly five years of growth.  As reported by the New York Times.

Gross domestic product, the broadest measure of goods and services produced, fell 9.5 percent in the second quarter of the year as consumers cut back spending, businesses pared investments and global trade dried up, the Commerce Department said.

The drop — the equivalent of a 32.9 percent annual rate of decline — would have been even more severe without trillions of dollars in government aid to households and businesses.

But there is mounting evidence that the attempt to freeze the economy and defeat the virus has not produced the rapid rebound that many envisioned. A surge in coronavirus cases and deaths across the country has led to a renewed pullback in economic activity, reflecting consumer unease and renewed shutdowns. And much of the government support is on the verge of running out, with Washington at an impasse over next steps.

“In another world, a sharp drop in activity would have been just a good, necessary blip while we addressed the virus,” said Heather Boushey, president of the Washington Center for Equitable Growth, a progressive think tank. “From where we sit in July, we know that this wasn’t just a short-term blip. We did not get the virus under control.”

Data from Europe shows what might have been. Germany on Thursday reported a drop in second-quarter G.D.P. that was even steeper than the U.S. decline. But in Germany, coronavirus cases fell sharply and remain low, which has allowed a much stronger economic rebound in recent weeks.

In the United States, the rebound appears to have stalled. More than 1.4 million Americans filed new claims for state unemployment benefits last week, the Labor Department said Thursday. It was the 19th straight week that the tally exceeded one million, an unheard-of figure before the pandemic. A further 830,000 people filed for benefits under the federal Pandemic Unemployment Assistance program, which supports freelancers, the self-employed and other workers not covered by traditional unemployment benefits.

Waiting for help with an unemployment insurance claim at an event in Tulsa, Okla., last week. As the pandemic’s economic damage persists, about 30 million people are drawing unemployment benefits.Credit…Joseph Rushmore for The New York Times

In total, some 30 million people are receiving unemployment benefits, a number that has come down only slowly as new layoffs — many of them permanent job losses, as opposed to the spring’s temporary furloughs — offset gradual rehiring. Some economists now fear that the monthly jobs report coming next week will show that total employment fell in July after two months of strong gains. The slow recovery, and signs of backsliding, are taking a toll on consumer confidence, which fell in July after rising in June.”

The adverse effects of the coronavirus pandemic on the economy were to be expected but this news is not good at all.  The effects were worse than anticipated and we are by no means out of the woods.


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