Corona virus pandemic has a negative impact on the economies of many countries, including the United States (US). In the second quarter of this year, the superpower’s economy contracted by 32.9%.
The Bureau of Economic Analysis noted this figure was the worst decline in history. The US entered the abyss recession. Here are the facts.
1. The Worst Economy in History
The decline of the US economy this time is the worst in history and the lowest since mid-1921 ago.
A sharp contraction occurred in household consumption, exports, production, investment, as well as state and local government spending, further depressing gross domestic product (GDP).
Household consumption, which accounts for around two-thirds of all economic activity in the US, has fallen by 25%. The service sector accounts for the largest percentage. The consumer price index, an important indicator of inflation, dropped 1.5% in the second quarter of 2020 compared to a 1.4% increase in the first quarter of 2020.
This is the worst period of the US economy, even when compared to the period of the Great Depression and the Great Recession. In comparison, the worst quarter of the US economy during the 2008 Global Financial Crisis was minus 8.4% in quarter IV-2008. In the first quarter of 1958, US economic growth was minus 10%. Meanwhile, the worst record for the US economy was in the second quarter of 1921.
2. First Recession in the Last 11 Years
Business stalled during a lockdown in the spring of this year led the US to finally fall into recession first in the last 11 years. In just a few months, the longest economic expansion in US history in the last five years was complete.
Recession is usually defined as a decrease in gross domestic product (GDP) or economic growth in two consecutive quarters. In the previous quarter (January to March), US GDP was minus 5%.
The decline in second quarter GDP was almost four times worse than during the height of the financial crisis, when the economy contracted at an annual rate of 8.4% in the fourth quarter of 2008.
But this is no ordinary recession. The combination of an unprecedented public health and economic crisis. And the numbers also don’t fully reflect the difficulties millions of Americans face.
3. Tens of Million People Are Losing Jobs
In April, more than 20 million American jobs were lost when businesses closed and most residents had to stay at home. That is the biggest decline since recorded history began more than 80 years ago. Claims for unemployment benefits have skyrocketed and are still not recovering to date.
Indeed the labor market has recovered since the lockdown ended and brought millions of people back to work.
The July employment report next week is expected to have an additional 2.3 million jobs which will bring the unemployment rate down to 10.3%. But this is still higher than the worst period of the financial crisis.
Watch Video “Hand in Hand Celebrity-Farmers in South Korea Face an Economic Crisis“