U.S. GDP falls record 32.9% in quarter

WASHINGTON — The coronavirus pandemic sent the U.S. economy plunging by a record-shattering 32.9 per cent annual rate last quarter and is still inflicting damage across the country, squeezing already struggling businesses and forcing a wave of layoffs that shows no sign of abating.

The economy’s collapse in the April-June quarter, stunning in its speed and depth, came as a resurgence of the viral outbreak has pushed businesses to close for a second time in many areas. The government’s estimate of the secondquarter fall in the gross domestic product has no comparison since records began in 1947. The previous worst quarterly contraction — at 10 per cent, less than a third of what was reported Thursday — occurred in 1958 during the Eisenhower administration.

So steep was the economic fall last quarter that most analysts expect a sharp rebound for the current July-September period.

But with coronavirus cases rising in the majority of states and the Republican Senate proposing to scale back aid to the unemployed, the pain is likely to continue and potentially worsen in the months ahead.

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.”

That’s because the virus has taken square aim at the engine of the American economy — consumer spending, which accounts for about 70 per cent of activity. That spending collapsed at a 34.6 per cent annual rate last quarter as people holed up in their homes, travel all but froze, and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.

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 one million people have applied for jobless aid. Before the coronavirus erupted in March in the U.S., the number of Americans seeking unemployment cheques had never exceeded 700,000 in any one week, even during the Great Recession.

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