The U.S. said Thursday its economy, ravaged by the coronavirus pandemic, plummeted 9.5% between April and June, the biggest quarterly plunge in records dating back seven decades.
The second quarter economic decline translated to an annualized drop of 32.9%.
The three-month drop reported by the Commerce Department, combined with a 4.8% dip from January through March, officially placed the U.S. economy, the world’s largest, into a recession as it struggles to regain its footing. The unchecked pandemic, with a surging number of new cases, has left more than 150,000 Americans dead and infected more than 4.4 million.
The economic effects of the virus continue unabated, with the Labor Department reporting that another 1.4 million workers filed for unemployment compensation last week, a pace of jobless benefit claims that has now held steady for weeks.
About 17 million U.S. workers remain unemployed and, since March, 53.8 million people have collected unemployment insurance at one time or another.
Now, the millions still unemployed are facing an imminent new peril to their financial well-being. The White House and Congress are deadlocked in negotiations over whether to extend the $600-a-week federal boost to less generous state unemployment benefits that expire Friday and what the ongoing payments, if any, should be.
President Donald Trump and Republican lawmakers are looking to immediately cut the federal boost by two-thirds, to $200 a week, while saying they hope eventually to set the benefit claims at 70% of workers’ former wages. Democratic lawmakers want to keep the current $600-a-week extra payments through the end of 2020.
Federal Reserve Chair Jerome Powell said Wednesday the new surge in confirmed coronavirus infections poses new threats to the economy. Millions of workers have returned to their jobs but thousands of employers have also continued to lay off workers or pause reopening their doors as the virus spreads, particularly in such large states as Florida, Texas and California.
“On balance, it looks like the data are pointing to a slowing in the pace of the recovery," Powell said. "I want to stress it’s too early to say both how large that is and how sustained it will be.”
Powell said some measures of consumer spending, such as debit card and credit card use, have fallen since late June when coronavirus infections jumped after easing in previous weeks.
He said labor market indicators signal slower job growth and that hotel occupancy rates have flattened. Powell said Americans are not going to restaurants, gas stations and beauty salons as much as they had been earlier this summer.
He said a full economic recovery depends on the country’s ability to control the virus, something it has been unable to do so far.
“A full recovery is unlikely until people are confident that it’s safe to engage in a broad range of economic activities,” Powell said at a news conference.
Lawmakers have voiced support or opposition to a wide range of coronavirus economic aid proposals. Some want to send another round of $1,200 stimulus payments to most adults in the country, even as some Republican lawmakers have expressed concerns about the country’s ever-increasing national debt that now totals more than $26 trillion. Some lawmakers have called for incentive payments to returning workers, some of whom have collected more in unemployment benefits than from their earnings while working.
Trump, facing a difficult re-election contest in November against former Vice President Joe Biden, said the coronavirus pandemic in the U.S. “will probably, unfortunately, get worse before it gets better.” But Trump is predicting the economy will regain strength later this year and into 2021.
The southern tier of U.S. states that had escaped the brunt of the pandemic in March and April has been particularly hard hit. Their governors reopened businesses — too soon, some now acknowledge — and younger people started socializing in public again at bars and restaurants without embracing such preventive practices as wearing a face mask or social distancing themselves from others by at least two meters.
Now, some state governors are ordering these businesses shut down again. Investment bank Goldman Sachs said 70% of the country has either reversed reopening plans or delayed them.
Key U.S. economic officials are predicting the country’s full recovery from the pandemic will take a lengthy period, extending well into 2021.
The Federal Reserve has predicted that U.S. unemployment will improve to 9.3% by the end of 2020 and to 6.5% by the end of next year.
