The US Economy contracted at a 32.9% annual rate from April through June, its worst drop on record, the Bureau of Economic Analysis said on July 30. Business ground to a halt during the pandemic lockdown inbeginnign in early March of 2020, and America plunged into its first recession in 11 years, putting an end to the longest economic expansion in US history and wiping out five years of economic gains in just a few months. A recession is commonly defined as two consecutive quarters of declining gross domestic product, the broadest measure of the economy. Between January and March, GDP declined by an annualized rate of 5%. But this is no ordinary recession. The combination of public health and economic crises is unprecedented, and numbers cannot fully convey the hardships millions of Americans are facing. In April alone, more than 20 million American jobs vanished as businesses closed and most of the country was under stay-at-home orders. It was the biggest drop in jobs since record-keeping began more than 80 years ago. Claims for unemployment benefits skyrocketed and have still not recovered to pre-pandemic levels. While the labor market has been rebounding since some states began to reopen, bringing millions back to work, the country is still down nearly 15 million jobs since February.
The Coronavirus pandemic pushed the US economy off a cliff. The second-quarter GDP drop was nearly four times worse than during the peak of the 2007-2010 financial crisis, when the economy contracted at an annual rate of 8.4% in the fourth quarter of 2008. Quarterly GDP numbers are expressed as an annualized rate. This means that the economy did not actually contract by one-third from the first quarter to the second. The annualized rate measures how much the economy would grow or shrink if conditions were to persist for 12 months. Not annualized, GDP declined by 9.5% between April and June, or by $1.8 trillion. But by either measure, it was still the worst quarter on record. The US only began keeping quarterly GDP records in 1947, so it is difficult to compare the current downturn to the Great Depression. Earlier recorded quarterly declines also pale in comparison to this year. Between April and June of 1980 (the start of the 1980-82 recession), the economy contracted at an annual rate of 8% on the heels of rising oil prices and restrictive monetary policy to control inflation. Additionally, in early 1958, GDP declined by an annualized 10%, as production slowed and high-interest rates put an end to the post-World War II expansion. The downturn followed the Asian flu pandemic of 1957, which killed 116,000 people in the US, according to the Center for Disease Control.
In response to the Coronavirus pandemic shutdown, the US government has deployed trillions of dollars in monetary and fiscal stimulus to help the country through the recession. Loan programs for companies, expanded unemployment benefits, and checks sent directly to many Americans were designed to get the economy back on track as quickly as possible. Economists predict the current, third quarter of the year will witness a sharp upswing, with the Federal Reserve Bank of New York, for example, forecasting an annualized 13.3% jump between July and September. While that would be good news, it does not mean the crisis is over. Earlier this week, the Fed extended its various lending programs through the end of the year to help business and market functioning. The central bank’s main street lending facility that is geared at small and medium-sized companies became operational only in mid-June, three months after the lockdown began.