Record economic plunge, bleak jobs numbers reveal virus toll

The U.S. economy plunged by a record-shattering 32.9% annual rate last quarter, and the coronavirus pandemic is still cutting a path of destruction, forcing millions out of work and shuttering businesses.

Posted: Jul 30, 2020 1:02 PM

WASHINGTON (AP) — The U.S. economy plunged by a record-shattering 32.9% annual rate last quarter, and the coronavirus pandemic is still cutting a path of destruction, forcing millions out of work and shuttering businesses.

The economy’s stunning contraction in the April-June quarter came as the viral outbreak pushed already struggling businesses to close for a second time in many parts of the country, sending unemployment surging to nearly 15%. The government’s estimate Thursday of the second-quarter fall in the gross domestic product was the sharpest such drop on records dating to 1947. The previous worst quarterly contraction, a 10% drop, occurred in 1958 during the Eisenhower administration.

Soon after the government issued the bleak economic data, President Donald Trump diverted attention by suggesting a “delay” in the Nov. 3 presidential election, based on his unsubstantiated allegations that widespread mail-in voting will result in fraud. The dates of presidential elections are enshrined in federal law and would require an act of Congress to change.

So steep was the economic fall last quarter that most analysts expect the economy to produce a sharp bounce-back in the current July-September period. Yet with the rate of confirmed coronavirus cases having surged in a majority of states, more businesses being forced to pull back on reopenings and the Republican Senate proposing to scale back government aid to the unemployed, the economy could worsen in the months ahead.

In a sign of how weakened the job market remains, more than 1.4 million laid-off Americans applied for unemployment benefits last week. It was the 19th straight week that more than 1 million people have applied for jobless aid. Before the coronavirus erupted in March, the number of Americans seeking unemployment checks had never exceeded 700,000 in any one week, even during the Great Recession.

An additional 830,000 people applied for unemployment benefits under a new program that extends eligibility for the first time to self-employed and gig workers. All told, the government says roughly 30 million people are receiving some form of jobless aid, though that figure might be inflated by double-counting by some states.

The pain could soon intensify: A supplemental $600 in weekly federal unemployment benefits is expiring, and Congress is squabbling about extending the aid, which will probably be done at some reduced level of payment.

Last quarter’s economic drop followed a 5% fall in the January-March quarter, during which the economy officially entered a recession triggered by the virus, ending an 11-year economic expansion, the longest on record in the United States.

The grim economic news deepened losses on Wall Street. The Dow Jones Industrial Average was down more than 300 points in late-morning trading.

The economic harm from the virus is extending well beyond the United States. On Thursday, Germany reported that its GDP tumbled 10.1% last quarter. It was the biggest such drop on records dating to 1970. And Mexico’s GDP sank 17.3% last quarter, also a record.

The U.S. contraction was driven by a deep pullback in consumer spending, which accounts for about 70% of economic activity. Spending by consumers collapsed at a 34.6% annual rate as travel all but froze and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.

The plunge in GDP “underscores the unprecedented hit to the economy from the pandemic,” said Andrew Hunter, senior U.S. economist at Capital Economics. “We expect it will take years for that damage to be fully recovered.”

A resurgence of viral cases in the South and the West has forced many bars, restaurants, beauty salons and other businesses to close again or reduce occupancy. Between June 21 and July 19, for example, the proportion of Texas bars that were closed shot up from 25% to 73%. Likewise, 75% of California beauty shops were shuttered July 19, up from 40% just a week earlier, according to the data firm Womply.

And many states have imposed restrictions on visitors from states that have reported high level of virus cases, thereby hurting hotels, airlines and other industries that depend on travel.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said the job numbers were disheartening.

“A resurgence in virus cases has resulted in a pause or rollback of re-openings across states, and the pace of layoffs is likely to pick up just as expanded unemployment benefits are expiring,” Farooqi said. “The risk of temporary job losses becoming permanent is high from repeated closures of businesses. That could result in an even slower pace of recovery.”

The picture looks dim for many of the jobless. Since she was laid off by a tech industry nonprofit in mid-May, Miranda Meyerson has been trying to find another job and to sign up for unemployment benefits.

“It’s just incredibly frustrating and demoralizing,” she said. Potential employers seem to be delaying hiring decisions.

“Nobody gets back to you,” said Meyerson, 38. “You feel like there’s only so long you can submit (applications) into a void.’’

Meyerson and her partner had moved from New York to Oakland, California, in March, just as the virus began to spread rapidly across the United States. The move complicated her efforts, so far futile, to collect benefits from a swamped California unemployment benefits system.

“They’re obviously totally overwhelmed,” she said. “You can’t even get on the phone to talk to anybody.”

Many economists note that the economy can’t fully recover until the pandemic is defeated — a point stressed Wednesday at a news conference by Federal Reserve Chair Jerome Powell. The Fed chairman warned that the viral epidemic has been endangering a modest economic recovery and that as a result, the Fed plans to keep interest rates pinned near zero well into the future.

“A poorly managed health situation and depressed incomes means the economy risks a double-dip recession without urgent fiscal aid,” said Gregory Daco, chief U.S. economist at Oxford Economics.

“Fiscal aid is a must pass,” Daco said. “Without further fiscal assistance, many households across the country are going to be left without much of an income stream and will react by severely cutting back on spending.”

Daco said the expiration of the $600 in federal unemployment aid means that many households could suffer a loss of income in the range of 50% to 75%.

“The economy,” Daco said, “is going to be running on very little fuel at a point when the recovery has really stalled.”

Terre Haute
Partly Cloudy
84° wxIcon
Hi: 89° Lo: 73°
Feels Like: 89°
Robinson
Clear
79° wxIcon
Hi: 90° Lo: 72°
Feels Like: 82°
Indianapolis
Partly Cloudy
81° wxIcon
Hi: 88° Lo: 74°
Feels Like: 84°
Rockville
Partly Cloudy
81° wxIcon
Hi: 88° Lo: 73°
Feels Like: 86°
Casey
Clear
84° wxIcon
Hi: 89° Lo: 73°
Feels Like: 88°
Brazil
Partly Cloudy
84° wxIcon
Hi: 88° Lo: 72°
Feels Like: 89°
Marshall
Partly Cloudy
84° wxIcon
Hi: 88° Lo: 71°
Feels Like: 89°
Showers and storms late this evening.
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Cases: 1388634

Reported Deaths: 25566
CountyCasesDeaths
Cook55620110461
DuPage923681316
Will769181032
Lake683491014
Kane59419807
Winnebago34106506
Madison30930526
McHenry29182294
St. Clair28316519
Peoria23443342
Champaign21100154
Sangamon19094240
McLean18553187
Tazewell17227305
Rock Island15245329
Kankakee14550217
Kendall1327899
LaSalle12779250
Macon10997211
DeKalb10116121
Vermilion10021142
Adams8677126
Williamson7595134
Whiteside7199174
Boone683677
Ogle620683
Grundy598678
Clinton578991
Coles5770100
Knox5642153
Jackson510065
Henry507870
Livingston489691
Woodford483282
Stephenson481985
Macoupin478288
Effingham476872
Franklin454178
Marion4513117
Jefferson4422122
Monroe438094
Lee419354
Randolph416487
Fulton405159
Logan396964
Morgan393482
Christian383875
Montgomery379474
Bureau378383
Fayette322555
Perry320360
Iroquois313867
McDonough290851
Jersey271652
Douglas260636
Saline260357
Lawrence241127
Shelby232638
Union228141
Crawford214525
Bond208724
Cass203527
Ford188948
Warren184148
Clark183733
Jo Daviess182724
Pike181853
Wayne181053
Hancock180631
Carroll178337
Richland176940
Edgar176740
White170626
Washington164825
Moultrie163128
De Witt157229
Mason154145
Piatt152414
Clay149643
Mercer149334
Johnson147616
Greene145134
Massac135840
Wabash135612
Cumberland130119
Menard125012
Jasper116718
Marshall108119
Hamilton84215
Schuyler7797
Brown7286
Pulaski7007
Stark64824
Edwards57712
Calhoun5302
Henderson52814
Scott4881
Putnam4863
Alexander47411
Gallatin4694
Hardin39112
Pope3284
Out of IL350
Unassigned02433

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Cases: 751242

Reported Deaths: 13795
CountyCasesDeaths
Marion1032931788
Lake556911009
Allen41692692
St. Joseph36990565
Hamilton36588417
Elkhart29398461
Tippecanoe22901226
Vanderburgh22556400
Porter19356325
Johnson18471389
Hendricks17682317
Clark13226195
Madison13149344
Vigo12614253
LaPorte12419221
Monroe12207176
Delaware10966198
Howard10321225
Kosciusko9630121
Hancock8576146
Bartholomew8169157
Warrick7860156
Floyd7811180
Grant7242179
Wayne7162201
Boone6966103
Morgan6761141
Dubois6218118
Marshall6209116
Cass6016110
Henry5900110
Dearborn589878
Noble581488
Jackson509076
Shelby501496
Lawrence4742122
Gibson444894
Clinton442355
Harrison441875
DeKalb439885
Montgomery438090
Whitley406543
Huntington402681
Steuben400159
Miami395269
Jasper388054
Knox375991
Putnam372960
Wabash361983
Ripley347170
Adams345555
Jefferson335886
White331953
Daviess3033100
Wells295281
Decatur289992
Greene286885
Fayette284864
Posey273835
LaGrange273072
Scott270156
Clay267148
Washington246036
Randolph244783
Jennings235349
Spencer234531
Starke228058
Fountain220948
Sullivan214643
Owen211858
Fulton202942
Jay200932
Carroll193620
Orange188255
Perry187237
Rush175926
Vermillion174844
Franklin170335
Tipton166246
Parke149416
Pike138234
Blackford136232
Pulaski120647
Newton113936
Brown104243
Crawford102516
Benton101714
Martin91715
Warren84015
Switzerland8148
Union72810
Ohio57911
Unassigned0420