BALTIMORE (AP) –
The U.S. economy shrank in April-June with an alarming annual rate of 31.7% as it struggled under the weight of the viral pandemic, the government estimated Thursday. It was the sharpest four-year drop on record.
The Department of Commerce downgraded its previous estimate of U.S. gross domestic product last quarter, finding that the devastation was slightly less than the 32.9% annual shrinkage it had estimated at the end of July. The previous worst quarterly decline since registration began in 1947 was an annual loss of 10% in 1958.
Last quarter closed businesses and millions of workers lost jobs as the world’s largest economy went into lockdown mode in what only fit managed to curb the spread of reported viral infections. The U.S. economy fell 5% annually in the first three months of the year when the coronavirus began making its presence felt in February and March.
A bounce-back when hiring so many companies reopened suggested that the economy began to recover in June with third-quarter growth expected to be around 20% year-on-year. But economists say a full recovery remains far away, given that the virus has yet to be contained and government financial support has disappeared.
“As we approach the fall, we see four major risks to the economy: a failure of further fiscal stimulus, a second wave of COVID-19 infection in the flu season, major election uncertainty and rising trade tensions with China,” said Lydia Boussour, senior American economist at Oxford Economics.
Unemployment is still high at 10.2%, with around 1 million people applying for unemployment benefits every week, even if the amount of help they receive is shrinking. Consumer confidence is tumbling. Although the stock market and home sales are booming, the broader economy is showing signs of stagnation, and millions are getting potential evictions from their homes.
The challenges reflect the unusual nature of the decline. Many American households have increased their savings and paid off debts – which may signal a hesitation to spend as they have in the past or revamped demand that could be released when the pandemic ends.
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