Second-quarter GDP plunges 32.9%, worst decline on record
BNY Mellon Investment Management chief strategist Alicia Levine discusses whether the market is finding its footing as small-cap stocks begin to outperform larger-cap tech stocks.
WASHINGTON — The U.S. economy shrank at a dizzying 33% annual rate in the April-June quarter — by far the worst quarterly plunge ever — when the viral outbreak shut down businesses, throwing tens of millions out of work and sending unemployment surging to 14.7%, the government said Thursday.
The Commerce Department’s estimate of the second-quarter decline in the gross domestic product, the total output of goods and services, marked the sharpest such drop on records dating to 1947. The previous worst quarterly contraction, a 10% drop, occurred in 1958 during the Eisenhower administration.
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Last quarter’s drop followed a 5% fall in the January-March quarter, during which the economy officially entered a recession triggered by the virus, ending an 11-year economic expansion, the longest on record in the United States.
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The contraction last quarter was driven by a deep pullback in consumer spending, which accounts for about 70% of economic activity. Spending by consumers collapsed at a 34% annual rate as travel all but froze and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.
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Business investment and residential housing also suffered sharp declines last quarter. Government spending, diminished by a loss of tax revenue that forced layoffs, also fell.
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The job market, the most important pillar of the economy, has been severely damaged. Tens of millions of jobs vanished in the recession. More than 1 million laid-off people have applied for unemployment benefits for 18 straight weeks. So far, about one-third of the lost jobs have been recovered, but the resurgent virus will likely slow further gains in the job market.