The US economy collapsed in the midst of the coronavirus pandemic, suffering the largest decline on record, while hopes for a recovery took another hit as job losses increased, according to government data released Thursday.
The 32.9 percent GDP contraction, though slightly better than expected, was the worst experienced by the world’s largest economy since at least 1947 and underscored the severity of the crisis, which hit with stunning speed and destroyed tens of millions of jobs.
While President Donald Trump continues to promise a dramatic recovery, COVID-19 cases have resurged in recent weeks, eroding early signs of a rebound and forcing authorities in several states to reimpose restrictions that sent workers back home.
The latest Labor Department data showed a second straight weekly increase in initial claims for jobless benefits following several weeks of declines, prompting renewed calls for Congress to quickly approve a new round of emergency spending to support the economy.
“The staggering news of the historic decline of the gross domestic product in the second quarter should shock us all,” US Chamber of Commerce Executive Vice President Neil Bradley said in a statement.
The data “should compel Congress to move swiftly” to provide assistance to unemployed workers and businesses.
Congress is currently locked in debate over the size and composition of the next spending bill, with Democrats fighting to retain the $600 additional weekly payment made to unemployed workers, while Republicans want to cut that money and offer protection to businesses that reopen if some employees become infected.
“COVID is the iceberg. If we don’t want to be the Titanic, we need more lifeboats to traverse COVID-tainted waters,” Grant Thornton chief economist Diane Swonk said on Twitter.
Shortly after the data were released, Trump took to Twitter to rail against potential voter fraud and suggest postponing the November 3 election.
“Delay the Election until people can properly, securely and safely vote???” Trump tweeted, prompting many to say he was trying to distract attention from the dismal numbers.
But his opponent, former vice president Joe Biden, laid the blame squarely at Trump’s feet, pointing to the death toll from the virus in the United States which on Wednesday exceeded 150,000.
“The depth of economic devastation our nation is experiencing is not an act of God, it’s a failure of presidential leadership. Had President Trump taken immediate and decisive action, tens of thousands of lives and millions of jobs would never have been lost,” Biden said in a statement.
“And now, Trump is failing to effectively manage our recovery — and Republicans in Congress are refusing to give working families the help they need today.”
After surging in March amid the massive job losses at the start of the pandemic, first time claims for jobless benefits have been falling for weeks, but they rose again to 1.43 million in the week ended July 25, the Labor Department said on Thursday.
That figure does not include the 829,697 new claims by people who filed under a special program for those who would not normally be eligible for aid.
The data show “the resurgence in COVID-19 cases is taking a toll on the recovery in the labor market,” Oxford Economics lead US economist Nancy Vanden Houten said in an analysis.
Continuing claims, the number of people receiving benefits for more than a week, jumped to over 17 million while the insured unemployment rate rose to 11.6 percent in the week ended July 18.
Following a 5.0 percent drop in the first three months of the year, the GDP plunge was driven largely by the drop in its largest component, consumer spending, which fell 34.6 percent annualized, according to the report, which was the first estimate for the second quarter.
Trade also took a huge hit in the latest quarter, with exports falling just over 64 percent, and imports down 53.4 percent.
But personal income got a boost of $1.4 trillion from the government emergency spending measures that provided payroll funds for businesses and direct unemployment payments to workers.