On April 29, the U.S. Commerce Department reported that the U.S. Gross Domestic Product (GDP) for the first quarter of the year declined at a 4.8% annual rate. “That is the first decline since 2014, and the worst quarterly contraction since the country was in a deep recession more than a decade ago.” [1]
Moreover, “Economists widely expect the Commerce Department to revise the first quarter figure even lower as more data becomes available. Goldman Sachs says the true decline was likely over 8 percent. JPMorgan Chase says it was likely over 11 percent.”
Most of this quarter that ended on March 31 “came before the coronavirus pandemic forced widespread shutdowns and layoffs. Economists expect figures from the current quarter to show G.D.P. contracting at an annual rate of 30 percent or more.” As the Wall Street Journal stated, this number “indicated the economy is sliding toward a near-certain recession and signaled the end of the longest economic expansion on record.”
“Many economists [already] have said the pandemic has put the U.S. in a recession. The number of American workers filing new claims for jobless benefits in recent weeks, at more than 26 million, points to an unprecedented wave of layoffs, and readings on consumer and business activity are showing record declines.”
Conclusion
These numbers confirm what everyone in the U.S. (and the rest of the world) already knows. The pandemic has caused and will continue to cause enormous economic pain in the U.S. and around the world.
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[1] The U.S. economy contracted by the most since the great recession,,N.Y. Times (April 29, 2020); Torry, U.S. Economy Shrank at 4.8% Pace in first Quarter, W.S.J. (April 29, 2020); Long, U.S. economy shrank 4.8 percent in first quarter, the biggest decline since the Great Recession, Wash. Post (April 29, 2020).
Increasing U.S. Unemployment and Federal Reserve Actions
On April 30, The U.S. Department of Labor announced that the prior week 3.8 million workers filed for unemployment benefits. That brought “the number of workers joining the official jobless ranks in the last six weeks to more than 30 million, and underscore just how dire economic conditions remain.”
Moreover, “according to many economists, the job losses may be far worse than government figures indicate. A study by the Economic Policy Institute found that roughly 50 percent more people than counted as filing claims in a recent four-week period may have qualified for benefits but were stymied in applying or didn’t even try because they found the process too formidable.”
The day before this announcement, the Chair of the Federal Reserve system, Jerome H. Powell, said that the increasing number of job losses was “heartbreaking.” He also said “second-quarter economic data would be ‘worse’ than anything previously seen, that it might take consumers time to feel comfortable spending again, and that companies and workers might need additional financial help.”
Therefore, Chair Powell “promised that the Fed would push its powers to their limit to help the economy, keeping rates low and funneling credit into crucial markets. But he also made it clear that elected policymakers must do their part to keep households and businesses from falling too far behind. They “should focus their efforts on protecting workers, businesses and households from ‘avoidable insolvency.’ Those policies, he added, ‘will come with a hefty price tag, but we would come out of this eventually with a stronger economy.’”
Other Fed officials “pledged to keep rates near rock bottom for the foreseeable future and to use their “full range of tools” to help the economy to climb back.”
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Chaney & King, Over 3.8 Million Americans Filed for Jobless Benefits Last Week as States Struggle With Coronavirus Claims Surge, W.S.J. (April 30, 2020), https://www.wsj.com/articles/states-struggle-with-coronavirus-unemployment-claims-surge-11588239004?mod=article_inline&mod=hp_lead_pos1
Another 3.8 million file unemployment claims, overwhelming the states, N,Y. Times (April 30, 2020), https://www.nytimes.com/2020/04/30/business/stock-market-today-coronavirus.html?campaign_id=60&emc=edit_na_20200430&instance_id=0&nl=breaking-news&ref=headline®i_id=26959897&segment_id=26290&user_id=cfad11b2e9610243d4c0a257cec3a98d
Timiraos, Fed’s Powell Says More Spending Will Be Needed From Congress, W.S.J. (April 29, 2020), https://www.wsj.com/articles/federal-reserve-interest-rates-decision-april-2020-11588111763
Smialek, Fed Suggests Tough Road Ahead as It Pledges to Help Insulate Economy, N.Y. Times (April 29, 2020(, https://www.nytimes.com/2020/04/29/business/economy/fed-coronavirus-interest-rates.html