However, recovery from the deepest recession since the Great Depression of the 1930s is far from complete. Thursday’s Commerce Department estimate of third-quarter growth recovered only about two-thirds of the production that was lost earlier this year when the economy essentially froze when safety orders forced restaurants, bars, and many to close. retailers.
The economy is now weakening again and facing new threats. Confirmed viral cases are increasing. Hiring has sunk. The government stimulus has run out. With no more federal aid in sight this year, Goldman Sachs has cut its growth forecast for the current fourth quarter to an annual rate of 3% from 6%.
“We have quite a noxious brew in the making with the pandemic intensifying, the lack of new government stimulus and signs that the economy is already slowing down quite significantly,” said Mark Zandi, chief economist at Moody’s Analytics.
Thursday’s GDP growth estimate is the last major economic report before Election Day, following a campaign that President Donald Trump has tried to build around his pre-pandemic economic record. Trump has garnered solid general public support for his handling of the economy.
Although the unemployment rate, at 7.9%, fell significantly from 14.7% at the beginning of the pandemic recession, it remains historically high. And hiring has slowed for three consecutive months. The economy still lacks approximately 10.7 million jobs to regain the 22 million jobs that were lost due to the pandemic.
Americans may feel battered by a report Thursday on the growth of the economy this summer, when an explosive rebound followed an epic collapse.
The government is likely to estimate that the economy grew faster in annualized terms in the last quarter than in any period since record-keeping began in 1947.
The economy is weakening and faces new threats. Confirmed viral cases are increasing. Hiring has sunk. The government stimulus has run out. And even the huge growth in the last quarter will leave the economy well below its level before the pandemic hit in March.
“The strength of this figure is an optical illusion,” wrote Nancy Vanden Houten, an economist at Oxford Economics, in a research note. “Since then, growth has slowed and we expect markedly weaker activity” in the October-December quarter and beyond
In the last major report on the US economy before Election Day, economists predicted that growth in the July-September quarter soared at an annual rate of 31%, according to data provider FactSet. That would follow a 31.4% drop in the April-June period, by far the worst quarterly decline in history, when the coronavirus outbreak shut down businesses and put tens of millions out of work.
If analysts’ outlook turns out to be roughly accurate, the economy, through the last quarter, will have recovered just over two-thirds of the output it lost to the pandemic recession. The economy contracted at an annual rate of 5% in the first three months of the year.
Mathematically, a rebound that equals or even slightly exceeds a previous decline does not mean that the economy has fully recovered. The reason is that the bounce comes from a smaller number base. To use a simple example: a drop from 100 to 70 is a 30% drop. However, a 30% bounce from 70 takes you back to 91. It would take a 43% gain to get back to 100.
There are also deeper reasons to view Thursday’s report on gross domestic product with skepticism. It reflects the huge profits last quarter that resulted simply from reopening many businesses after the virus crippled the economy in March and April.
Since August, the economic outlook has darkened as hiring has slowed. Consumers can spend cautiously in winter. And if rising COVID cases were to trigger widespread trade closures or restrictions, the economy would struggle to sustain a strong recovery. Goldman Sachs economists have already cut their growth forecast for the fourth quarter to an annual rate of 3% from 6%.
The seven-day moving average for new confirmed cases in the U.S. skyrocketed over the past two weeks from 51,161 to 71,832, according to data from Johns Hopkins University, and confirmed infections are increasing in 47 states.
“The basic reality is that the virus remains out of control and the risks to economic and social activity are perhaps even higher than in the spring,” said Aaron Sojourner, a labor economist at the University of Minnesota.
Americans show growing concern about the economy. Consumer confidence sank in October after rising sharply in September. Consumers’ outlook for the economy over the next six months fell particularly hard, according to the Conference Board, a business research group.
“There is little to suggest that consumers expect the economy to gather momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high,” said Lynn Franco, the board’s senior director of economic indicators. .
The pandemic has also complicated job search for many of the unemployed. One of them is Annette Tayama, who lost a temporary administrative job in March. She was fired because she did not want to return to the office for fear of infecting her 16-year-old son, who was recovering from knee surgery. This year he underwent three surgeries, including two related to a burst appendix, leaving the family with $ 98,000 in medical bills.
Her husband still has his job in a warehouse. And Tayama, who lives near Sacramento, California, originally received a $ 600-a-week unemployment benefit that Congress provided in a $ 2 billion aid package that it passed in the spring. But the $ 600 benefit expired in July. Tayama’s state unemployment aid of $ 75 per week has also expired. As a result, his family has fallen behind on his utility bills and his medical debt is in collection.
Despite 25 years of experience in office clerical work, Tayama is looking for jobs outside of an office, with little or no customer contact, such as delivery driving.
“It’s very scary to go back” to an office, he said. “I don’t want to be in contact with a lot of people.”
But finding work can be challenging. Although the unemployment rate of 7.9% has dropped significantly from 14.7% at the beginning of the pandemic recession, it remains historically high. And hiring has slowed for three consecutive months. The economy still lacks approximately 10.7 million jobs to regain the 22 million jobs that were lost due to the pandemic.
“We bounced off the bottom really aggressively, but since then, there’s a slowdown,” said Seth Carpenter, UBS chief US economist. “The big issue is not how big the third-quarter rally is, but how big fast is the next phase of recovery coming? “
Carpenter said he believes growth is slowing to just a 2.5% annual rate in the current quarter, and that the economy will not return to its pre-pandemic production levels until late next year or early 2022.
The job market may take longer to fully recover, Carpenter said. Millions have left the workforce and are no longer looking for work, artificially lowering the unemployment rate. They include many women who have had to quit their jobs to care for their children and now attend online school from home. The proportion of Americans working or looking for work has dropped to 61.4%, the lowest level since 1976.
“That is the real measure from my perspective of whether we are recovered,” Carpenter said.
This story has been published from a news agency feed with no changes to the text.
.
