The U.S. economy suffered its sharpest downturn since at least the 1940s in the second quarter, highlighting how the pandemic has ravaged businesses across the country and left millions of Americans out of work.
Gross domestic product shrank 9.5% in the second quarter from the first, a drop that equals an annualized pace of 32.9%, the Commerce Department's initial estimate showed Thursday. That's the steepest annualized decline in quarterly records dating back to 1947 and compares with analyst estimates for a 34.5% contraction. Personal spending, which makes up about two-thirds of GDP, slumped an annualized 34.6%, also the most on record.
The figures lay bare the extent of the economic devastation that resulted from the government-ordered shutdowns and stay-at-home orders designed to slow the spread of the novel coronavirus that abruptly brought a halt to the longest-running expansion. While employment, spending and production have improved since reopenings picked up in May and massive federal stimulus reached Americans, a recent surge in infections has tempered the pace of the recovery.
That surge, the result of America's failure to contain the virus, indicates that the U.S. economy is likely to recover more slowly than places that have done a better job, such as the eurozone. And the longer the pandemic lasts without a vaccine, the longer economic output will remain below pre-crisis levels, leaving permanent scars on many businesses and workers.
"We already know that activity rebounded strongly in May and June, setting the stage for a strong rise in GDP in the third quarter," Andrew Hunter, senior U.S. economist at Capital Economics, said in a note. "Nevertheless, with the more recent resurgence in virus cases starting to weigh on the economy in July, a continued 'V-shaped' recovery is unlikely."