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U.S. Economy Shrinks by Historic 32.9%; Jobless Claims Rise Again

Economic IndicatorsJul 30, 2020 08:34AM ET
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By Noreen Burke 

Investing.com - The U.S. economy contracted by an unprecedented annualized rate of 32.9% in the second quarter, the Commerce Department reported Thursday, the worst decline since the Great Depression as the coronavirus pandemic hammered consumer spending.

Economists had forecast a slightly larger decline of 34.1% after a 5% contraction in the first quarter, although they warned that the figure grossly exaggerates the nature of the drop. 

The publication of annualizied GDP data is "is a process so absurd as to defy any sort of economic logic," said Paul Donovan, chief economist with UBS Global Wealth Management, in a morning briefing.

The 9.5% drop in output, in absolute terms, was the sharpest fall in output since the government started to keep records in 1947. 

Though economic activity began to pick up May as restrictions aimed at preventing the spread of the virus eased, momentum has waned amid a resurgence in cases, particularly in the South and West, which has led to several states halting or rolling back reopening measures.  

While the curve of new infections has flattened somewhat in the South and West in recent days, Deborah Birx, the White House's Coronavirus Task Force Coordinator, told Fox News on Thursday that the virus is now spreading more deeply into other mid-western states, including Kentucky, Tennessee, Ohio, Missouri and Kansas.

The Federal Reserve on Wednesday acknowledged that the economic outlook would depend on the path of the virus.

"The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said.

At the same time, the Labor Department reported that the number of Americans applying for initial unemployment benefits edged up to 1.434 million in the week ending July 25, from a upwardly revised 1.422 million the prior week, highlighting concerns over the slowdown in the economic recovery.

It was the second consecutive weekly increase.

The number of continuing claims, which are reported with a one-week lag to initial claims, rose more sharply than expected to 17.018 million. The previous week's figure was revised down to 16.151 million.

The reports come as millions of unemployed Americans are set to lose a $600 weekly jobless benefit supplement on Saturday, when part of a historic government aid package of nearly $3 trillion expires. 

Talks between the Democrat-controlled House of Representatives and the Republican-controlled Senate on extending the benefits are currently deadlocked. White House Chief of Staff Mark Meadows said late on Wednesday that they were likely to expire.

U.S. Economy Shrinks by Historic 32.9%; Jobless Claims Rise Again
 

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Comments (69)
Aeron Geronimo
Aeron Geronimo Jul 31, 2020 4:08AM ET
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Too much noise here. As long as data beats economists estimate, meaning it is better COMPARABLY on what was forecasted. For some logic reasons, oh you will live only for a month, and you survived 6 months before dying, you still die but atleast you lasts better than expected. Bizzare example but atleast not ignorant to see negative numbers and wants everything to crash. You wanna get revenge on losing your job, house and assets last 2008? not gonna happen!
Tim Mcdaniel
Tim Mcdaniel Jul 31, 2020 1:49AM ET
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Biden couldn't negotiate girl scout cookies at full price but we know where his thoughts would be.
Mike Hobbins
Mike Hobbins Jul 31, 2020 1:12AM ET
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Donald Trump/gop republicans couldn't negotiate with a person, To Save their Lives..
Gregory Barone
Gregory Barone Jul 30, 2020 10:14PM ET
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Libersl Commie Democrats doing all they can to destroy our economy, culture, history and ecceptionalism!
Mike Roddy
Mike Roddy Jul 30, 2020 6:28PM ET
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as long as the Fed is backstopping the stock market with 80 billion a month in liquidity, US debt will rise and the US dollar will fall. what's the dollar going to look like after another year of the fed adding trillions to their balance sheet?
Ricardo Diogo
Rcd72 Jul 30, 2020 2:53PM ET
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in fact it has fallen , the US dollar is 10%!!! lower against the €....1.06to 1.18!!!!Dow is worth 10% less than 20 days ago .soon it will be at FX 1.3...the fed is currency manipulating
Benoit Avril
Benoit Avril Jul 30, 2020 2:45PM ET
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Remember that your president said, "If US has 100,000 to 200,000 deaths, we’ve done a ‘good job’", that's precision, right in the middle. Maybe you will end with 200 000.
Tony Cheng
Tony Cheng Jul 30, 2020 2:45PM ET
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This is Karma work. USA drop the atom bomb in Asia, now nature exacts revenge to *******off the Anglos. Asia 100,000+ deaths, USA 100,000+ deaths, favor returned.
Musical Critic
Musical Critic Jul 30, 2020 2:39PM ET
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Fed has become the biggest joke of the century! Trump too!!
Jesse Mulliniks
Jesse Mulliniks Jul 30, 2020 2:38PM ET
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NASDAQ at all time highs. What is going on?
Plopseven Schwartz
Plopseven Schwartz Jul 30, 2020 2:38PM ET
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The dollar is failing
Ty Darapiza
Ty Darapiza Jul 30, 2020 2:38PM ET
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don't fight the fed!
Christopher Conde
Christopher Conde Jul 30, 2020 2:25PM ET
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US stocks is going to drop. Tech’s earnings today will only move the market sideways. Better to divert investment to safe haven assets like gold & bitcoin.
Denis Iliescu
Denis Iliescu Jul 30, 2020 2:14PM ET
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If. I take a look at us100, is unreal what happen, rise and rise, market will drop dramaticaly .....
Ferdy ava
Ferdy ava Jul 30, 2020 1:53PM ET
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ohh man stay in position 1.30813 why is the rise so far from tp 1.28240 :(
Ed Glass
EddieG Jul 30, 2020 1:51PM ET
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Herman Cain dies from coronavirusdeniers.
eddie glass
eddie glass Jul 30, 2020 1:37PM ET
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that is what happens when you allow politicians to lock down the economy for a virus that we now know is less deadly than the common flu. countries that did lockdowns had no higher per capita de.ath rates or infection rates than those that did not lockdown. all a political performance during an election year.
Plopseven Schwartz
Plopseven Schwartz Jul 30, 2020 1:37PM ET
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You are so, so mistaken.
Benoit Avril
Benoit Avril Jul 30, 2020 1:37PM ET
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Less deadly than the common flu but had made 22000 deaths in New York alone which is populated by 8 million of people?
Thom Miller
Thom Miller Jul 30, 2020 1:37PM ET
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Trump killed them all!
Ricardo Diogo
Rcd72 Jul 30, 2020 1:07PM ET
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keep pouring in the money and it will be possible to get negative dividends!!!!!
Hayden Price
Hayden Price Jul 30, 2020 1:00PM ET
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Bullish! DOW 60k!
Alan Rice
Alan Rice Jul 30, 2020 12:46PM ET
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Finally !!!( some GOOD news).
Maycon Klann
Maycon Klann Jul 30, 2020 12:45PM ET
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32.9% instead of 34.1% - That's incredible!!! BETTER THAN EXPECTED!!! (ironic laugh) sooner some genius comes with positive news about this...
Ricardo Diogo
Rcd72 Jul 30, 2020 12:44PM ET
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when GDP, all time record, 32% slump , 1.4 million unemployment weekly does not affect the stocks indexes ...then stocks are just like bitcoin...a bubble full of nothing
Benoit Avril
Benoit Avril Jul 30, 2020 12:44PM ET
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It's just that the money doesn't know where to go.
Thom Miller
Thom Miller Jul 30, 2020 12:42PM ET
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Speaking of Covid19, let’s see how Herman Cain’s funeral stacks up against John Lewis’s.
Shriram Raja
Shriram Raja Jul 30, 2020 12:36PM ET
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now see the game fed cut more and market going to boom very big .
Tommy George
Tommy George Jul 30, 2020 11:14AM ET
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Why don’t they acknowledge the state of the ecomony look at the small busineess, the economy is horrible, my business sales are still down about 60 percentHanding out excessive amounts of money to unemployed and rent forgiveness is just a form of Socializm. Working class has to oay for it one way or the other.
Shauna Herrera
Shauna Herrera Jul 30, 2020 11:14AM ET
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Because like the author of the article said, the process is so absurd it defies logic, saying no one can understand the census of status numbers.....lol
Raksaksa Tonne
Raksaksa Tonne Jul 30, 2020 11:01AM ET
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Now that the virus is 100x worse than previously expected, I guess the Fed will print even more magic fairy money to make stocks 100000x more overvalued.
Jim Robertson
Jim Robertson Jul 30, 2020 10:38AM ET
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the tar and feathering should have started 16 years ago with a racist president.
John Mage
John Mage Jul 30, 2020 10:38AM ET
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So let's vote for the ****Biden instead
Evan Ault
Evan Ault Jul 30, 2020 10:05AM ET
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its been a long time since we have tarred and feathered politicians in this country. might be about time to bring back that practice.
Evan Ault
Evan Ault Jul 30, 2020 10:05AM ET
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