The sharpest contraction in since the Second World War in the United States economy was reported for the April to June quarter at an annual rate of 32.9 per cent year on year, according to government figures released by the government on Thursday.
The figures underscored the heavy toll on the country’s economy imposed by the novel coronavirus pandemic.
With the record breaking contraction in the US economy, an additional 1.43 million Americans filed for unemployment benefits last week which marked a second straight week of rise after a decline for four months.
This record contraction in the quarterly gross domestic product (GDP) of the country is the highest since records were kept starting in 1945. While economists forecast a sharp rise in the numbers for the later part of this year, the positive forecast has been clouded by the resurgence of the pandemic in parts of the country.
According to Credit Suisse, in the worst quarter of 2008 when the global financial crisis was at its peak, the contraction was of 8.4 per cent. The previous record for quarterly contraction of the economy was of 10 per cent in 1958 during the Eisenhower recession.
The contraction was largely because of the closing down of the US economy in March in efforts to prevent the spread of the novel coronavirus pandemic. The temporary closure of businesses resulted in historic levels of layoffs and levels of unemployment soared to levels that were eclipsed only during the Great Depression of the 1930s.
And while all states of the country have started to reopen economic activities, the virus has kept spreading. More than 150,000 people have now died of the disease. That has resulted in restrictions being imposed again in some states with a rise in cases of Cvoid-19 infections in California, Florida, Texas and elsewhere. That has put pressure on the recovery of the US economy.
“This is something we have never seen before,” said Jason Reed, assistant chair of finance at the University of Notre Dame. “At first I felt it was like a natural disaster that had hit the entire country at the same time. Now it is evolving into something worse than that.”
These grim data come at a time when the US Congress is finding it hard to come to n agreement on a new round of financial support for those who have lost their jobs in the shutdown.
An extra $600 in benefits a week was promised by the US initially for people laid-off by the pandemic. But that payment time period is set to expire on Friday and Congress has not yet finalized its replacement. About 20 million Americans qualified for the extra payments and the payments now account for 15 per cent of the entire wages of the country.
Major challenges from the coronavirus pandemic are being faced by the US economy, the Federal Reserve said on Wednesday, and added that it would continue to take aggressive action to support a recovery of the economy. “The path of the economy will depend significantly on the course of the virus,” officials said in a statement.
(Adapted from TheGuardian.com)