Increasing Global Economic Collapse; U.S. economy contracted record 33 (3) % in Q2 amid state shutdowns, COVID-19 contagion fears
Paul Davidson USA TODAY July 30, 2020
The U.S. economy turned in its worst performance ever in the second quarter as the COVID-19 pandemic shuttered businesses across the country and consumers hunkered down at home.
The nation’s gross domestic product, the value of all goods and services produced in the U.S., contracted at a staggering seasonally adjusted annual rate of 32.9% in the April-June period, the Commerce Department said Thursday.
Economists surveyed by Bloomberg had forecast a 34.8% drop in GDP. To put the plunge in perspective, it was about three times larger than the previous largest drop in quarterly output.
“The GDP numbers are mind-boggling,” says Ian Shepherdson, chief U.S. economist of Pantheon Macroeconomics.
The free-fall was driven by a historic 34.6% pullback in consumer spending as states closed down nonessential businesses such as restaurants, malls and movie theaters, and Americans avoided public gathering spots and travel out of contagion fears. But nearly every corner of the economy was battered, including business investment and stockpiling, housing and exports, though trade overall and government outlays added to growth.
The contraction followed a 5% slide in economic output in the first quarter.
But the nation’s steepest-ever recession is also expected to be the shortest, with consumer spending, job growth and other key measures bouncing back sharply in May and June as states began allowing businesses to reopen in phases and many employees were rehired.
About $2.5 trillion in federal government aid also propped up spending, including forgivable loans to small businesses that retained or brought back workers, as well as $1,200 checks to individuals and a $600 supplement to weekly state unemployment benefits.
Every state was walloped last quarter, though ones that rely heavily on travel tourism, such as Hawaii and Nevada, were hit hardest by the downturn, according to employment figures analyzed by economist Adam Kamins of Moody’s Analytics. Michigan, the heart of the nation’s auto industry, was slammed as consumers put off car purchases. And densely populated Northeast states struck by the most severe virus outbreaks — like New York, New Jersey and Massachusetts – absorbed among the heaviest economic losses as governors shut down earlier and residents stayed home.
Meanwhile, more rural states with less virulent outbreaks were more insulated from economic damage, Kamins says, such as Idaho, Utah, Oklahoma, Arizona and Nebraska. Those patterns are now largely reversing, with initially lax states suffering COVID-19 surges.
Recent spikes in coronavirus cases across much of the South and West have led at least 20 states to pause or roll back reopening plans, dampening the anticipated recovery in the second half of the year. The number of hours worked in states such as Texas, Florida and Arizona recently has declined, according to Homebase, a supplier of employee scheduling software.
After the nation recouped about a third of the 22 million jobs lost early in the crisis in May and June, a chunk of those gains could be erased in July with millions of jobs shed, says economist Kathy Bostjancic of Oxford Economics.
Many analysts still expect the hot-spot states to resume reopening after the outbreaks are tamed in the next month or so, helping America’s economy bounce back and dodge another recession. Scott Anderson, chief economist of Bank of the West, estimates the economy will grow an annual rate of 17.3% in the third quarter and 4.9% in the fourth quarter, assuming Congress passes another $1.5 trillion to $2 trillion stimulus package.
With some businesses closing for good and millions of workers laid off permanently, Barclays reckons the nation’s economic output won’t return to its pre-pandemic level until early 2022. And Moody’s Analytics figures a return to pre-pandemic employment levels won’t come until 2023.
Consumer spending nosedives
Consumer spending plummeted 34.6%, the largest drop on record, after sliding 6.9% in the first quarter. The state shutdowns and Americans’ contagion fears combined with massive layoffs, prompted shoppers to halt much of their discretionary outlays.
Consumption makes up about 70% of economic activity.
Business investment tanks
Business investment sank a record 27%, after a 6.7% drop in the first quarter. The culprits were business and factory closures, along with uncertainty about the outbreak’s economic effects. Spending on equipment such as computers and factory equipment dropped 37.7%, while outlays on buildings, oil rigs and other structures declined 34.9%.
Companies draw down inventories
Instead of adding to their stockpiles, firms drew from existing supplies to meet sharply reduced demand, contributing nearly 4 percentage points to the drop in GDP.
Residential investment plunges
Housing construction and renovation broke a string of three straight quarterly increases, tumbling 38.7%. Despite historically low mortgage rates, the outbreak suspended construction projects and prompted homebuyers to stay on the sidelines.
Overall, though, housing is the economy’s biggest bright spot, with housing starts rebounding strongly in May and June after slumping in March and April as rock-bottom mortgage rates attracted buyers.
Government spending rises
Government outlays represented the biggest positive for the economy as federal spending jumped 17.4%, bolstered partly by the stimulus measures. The increase more than offset a 5.6% drop in state and local government spending amid falling tax and other revenue and school closures.
Trade aids growth
U.S. exports fell 64.1%, hammered by stricter lockdowns overseas than in the U.S., while imports decreased 53.4% as Americans substantially cut their spending amid the shutdowns.
Since the drop in imports more than offset the decline in exports in absolute terms, the nation’s trade gap narrowed, adding slightly to economic growth.
The economy is already on the mend but faces a tortuous comeback in the face of virus flare-ups in parts of the country and the risk of a second COVID-19 wave in the fall. A more sustained rebound in consumer spending isn’t expected until a vaccine is available sometime next year and Americans are emboldened to travel and spend freely.
Even then, deep bruises will linger as a result of permanently laid-off workers who will struggle to find new positions, or retire, and businesses that will never reopen.
“We expect it will take years for that damage to be fully reversed,” says Andrew Hunter, senior U.S. economist at Capital Economics.
In His Service,
Night Watchman Ministries
Make Your Decision for Christ NOW!!!!!!! Time is Up!!!!!!!
Jesus Christ’s Offer of Salvation:
The ABCs of Salvation through Jesus Christ (the Lamb)
A. Admit/Acknowledge/Accept that you are sinner. Ask God’s forgiveness and repent of your sins.
. . . “For all have sinned, and come short of the glory of God.” (Romans 3:23).
. . . “As it is written, There is none righteous, no, not one.” (Romans 3:10).
. . . “If we say that we have no sin, we deceive ourselves, and the truth is not in us.” (1 John 1:8).
B. Believe Jesus is Lord. Believe that Jesus Christ is who He claimed to be; that He was both fully God and fully man and that we are saved through His death, burial, and resurrection. Put your trust in Him as your only hope of salvation. Become a son or daughter of God by receiving Christ.
. . . “That whosoever believeth in him should not perish, but have eternal life. For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life. For God sent not his son into the world to condemn the world; but that the world through him might be saved. (John 3:15-17). For whosoever shall call upon the name of the Lord shall be saved.” (Romans 10:13).
C. Call upon His name, Confess with your heart and with your lips that Jesus is your Lord and Savior.
. . . “That if thou shalt confess with thy mouth the Lord Jesus, and shalt believe in thine heart that God hath raised him from the dead, thou shalt be saved. For with the heart man believeth unto righteousness; and with the mouth confession is made unto salvation.” (Romans 10:9-10).
. . . “If we say that we have no sin, we deceive ourselves, and the truth is not in us. If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness. If we say that we have not sinned, we make him a liar, and his word is not in us.” (John 1:8-10).
. . . “And he is the propitiation for our sins: and not for ours only, but also for the sins of the whole world. (John 2:2).
. . . “In this was manifested the love of god toward us, because that God sent his only begotten Son into the world, that we might live through him. And we have seen and do testify that the Father sent the Son to be the Saviour of the world. Whosoever shall confess that Jesus is the Son of God, God dwelleth in him, and he in God.” (1 John 4:9, 14-15).
. . . “But God commendeth his love toward us, in that, while we were yet sinners, Christ died for us. Much more then, being now justified by his blood, we shall be saved from wrath through him. For if, when we were enemies, we were reconciled to God by the death of his Son, much more, being reconciled, we shall be saved by his life.” (Romans 5:8-10).
. . . “For the wages of sin is death; but the gift of God is eternal life through Jesus Christ our Lord.” (Romans 6:23).
. . . “Jesus saith unto them, I am the way, the truth, and the life, no man cometh unto the Father, but by me.” (John 14:6).
. . . “For I am not ashamed of the gospel of Christ: for it is the power of God unto salvation to everyone that believeth.” (Romans 1:16).
. . . “Neither is there salvation in any other: for there is none other name under heaven given among men, whereby we must be saved.” (Acts: 4:12).
. . . “Who will have all men to be saved, and to come unto the knowledge of the truth for there is one God, and one mediator between God and men, the man Christ Jesus.” (1 Timothy 2:4-6).
. . . “For God did not appoint us to suffer wrath but to receive salvation through our Lord Jesus Christ.” (1 Thessalonians 5:9).
. . . “But as many as received him, to them gave the power to become the sons of God, even to them that believe on his name.” (John 1:12).
True Church / Bride of Christ Spared from God’s Wrath:
Romans 5:8-10. “But God commendeth his love toward us, in that, while we were yet sinners, Christ died for us. Much more then, being now justified by his blood, we shall be saved from wrath through him. For if, when we were enemies, we were reconciled to God by the death of his Son, much more, being reconciled, we shall be saved by his life.”
Romans 12:19. Dearly beloved, avenge not yourselves, but rather give place unto wrath: for it is written, Vengeance is mine; I will repay, saith the Lord.
1 Thessalonians 1:10. And to wait for his Son from heaven, whom he raised from the dead, even Jesus, which delivered us from the wrath to come.
1 Thessalonians 5:9. For God hath not appointed us to wrath, but to obtain salvation by our Lord Jesus Christ,
Romans 8:35. Who shall separate us from the love of Christ? shall tribulation, or distress, or persecution, or famine, or nakedness, or peril, or sword?
Jeremiah 30:7. Alas! for that day is great, so that none is like it: it is even the time of Jacob’s trouble, but he shall be saved out of it.
Revelation 3:10 Because thou hast kept the word of my patience, I also will keep thee from the hour of temptation, which shall come upon all the world, to try them that dwell upon the earth.
Categories: Economic Collapse