Coronavirus continues to stifle economic activity across the U.S.
The virus-induced economic crisis has torn through thousands of American businesses, resulting in an alarming GDP contraction at the end of the second quarter. Stay-at-home regulations, combined with government-ordered closures implemented to limit the spread of COVID-19 have effectively halted economic expansion across the United States.
According to statistics released by the Commerce Department, the economy contracted at a rate of 9.5% from the first to the second quarter. In the steepest annualized contraction since 1947, U.S. gross domestic product shrank at a rate of 32.9% – analyst projections had initially figured this number to accumulate to a 34.5% slump.
Personal Spending
Personal spending is at an all-time low with an annualized decrease of 34.6% – the most drastic dip in consumer activity in a single year since the 1940s. Investment also saw a substantial decrease of 27%.
The figures released today are the first of three estimates for Q2 numbers released by the Bureau of Economic Analysis. The statistics will be amended as new projections are released over the coming months.
Unemployment
Bloomberg reports that jobless claims have increased for the second week in a row. According to the Department of Labor, the end of week July 25 marked an increase of 12,000 initial claims to 1.43 million initial claims in total. Comparatively, the end of the week July 18 measured an increase of 867,000 claims made for ongoing unemployment benefits, a total amounting to 17 million applications.
Since the pandemic took a turn in February, Americans have lost almost 15 million jobs. For the same period, the U.S. Census approximates that of all homes in which US adults reside, half have witnessed reductions in income.
The Road to Recovery
As officials scramble to contain the rate of infections, as well as restart the economy, analysts have begun to paint a different picture of what consumer spending will look like over the next months.
ING Chief International Economist James Knightley suggests economic recovery from the virus is long from over. While financial markets may predict an economic rebound, “a renewed spike in cases is forcing state governors to backtrack on reopening plans, which is closing businesses, with workers losing their jobs.”
As well, Americans currently out of work will no longer have access to the same government assistance package for the pandemic. Knightley continues: “The $600 a week unemployment benefits boost to 30 million-plus claimants has effectively ended and will likely be replaced with something much smaller in size.”
Real-time figures for the third quarter and the effect of the government assistance will be released on October 29, mere days before the upcoming presidential election.
The triangulation of unemployment stifled incomes, and the uncertainty of the virus leave much room for speculation at the optimism of current market recovery data.
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