U.S. Economy Contracted at Record Rate Last Quarter; Jobless Claims Rise to 1.43 Million

[mahatmakanejeeves]

Last edited Fri Jul 31, 2020, 08:22 AM - Edit history (3)

Source: The Wall Street Journal.

U.S. Economy Contracted at Record Rate Last Quarter; Jobless Claims Rise to 1.43 Million
The Commerce Department's initial estimate of U.S. gross domestic product in the second quarter is the steepest drop in more than 70 years

By Harriet Torry
https://twitter.com/HarrietTorry
Updated July 30, 2020 3:21 pm ET

The economy contracted at a record rate last quarter and July setbacks for the jobs market added to signs of a slowing recovery as the country faces a summer surge in coronavirus infections.

The Commerce Department said U.S. gross domestic product--the value of all goods and services produced across the economy--fell at a seasonally and inflation adjusted 32.9% annual rate in the second quarter, or a 9.5% drop compared with the prior quarter. The figures were the steepest declines in more than 70 years of record-keeping.

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Read more: https://www.wsj.com/articles/us-economy-gdp-report-second-quarter-coronavirus-11596061406

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I need to correct my original post. The original post said that the US economy contracted by worst-ever 32.9% in Q2. No, it did not. It contracted at an annual rate of 32.9 percent. The actual drop was 9.5 percent. That's way different. Many people online have pointed this out. I should have caught that. I apologize for not having done so at the time.

Here's the original post:

Q2 GDP: US economy contracted by worst-ever 32.9% in Q2, crushed by coronavirus lockdowns

https://finance.yahoo.com/news/q2-gdp-us-economy-coronavirus-pandemic-consumer-171558880.html

Emily McCormick
Reporter
Yahoo Finance July 30, 2020

The US economy contracted at the sharpest rate on record in the second quarter this year, affirming fears that the coronavirus pandemic and measures to contain it drove a historic plunge in consumer and business activity.

Here were the main metrics from the Bureau of Economic Analysis' advance Q2 GDP report, compared to consensus estimates compiled by Bloomberg:

Q2 GDP annualized, quarter over quarter: -32.9% vs. -34.5% expected vs. -5.0% in Q1

Q2 Personal consumption: -34.6% vs. -34.5% expected vs. -6.8% in Q1

Core Personal consumption expenditures, quarter over quarter: -1.1% vs. -0.9% expected vs. 1.7% in Q1

{snip}

-- -- -- -- -- --

Three months from today, just a week before the election, it will be right back up by the same amount.

The GDP reports come from the Bureau of Economic Analysis, which is part of the Department of Commerce.

From the source:

July 30, 2020
Gross Domestic Product, 2nd Quarter 2020 (Advance Estimate) and Annual Update
Real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter of 2020, real GDP decreased 5.0 percent.

https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-annual-update

[BumRushDaShow]

1. WaPo link

U.S. economy contracted at fastest quarterly rate on record from April to June as coronavirus walloped workers, businesses

By Rachel Siegel and Andrew Van Dam
July 30, 2020 at 8:30 a.m. EDT


The U.S. economy shrank 9.5 percent from April through June, the largest quarterly decline since the government began publishing data 70 years ago, and the latest, sobering reflection of the pandemic’s economic devastation.

The second quarter report on gross domestic product covers some of the economy’s worst weeks in living memory, when commercial activity ground to a halt, millions of Americans lost their jobs and the nation went into lockdown. Yet economists say the data should also serve as a cautionary tale for what’s at stake if the recovery slips away, especially as rising coronavirus cases in some states have forced businesses to close once again.

GDP shrank at an annual rate of 32.9 percent, according to the Bureau of Economic Analysis, the agency that publishes the statistics on quarterly economic activity. While it usually stresses the annualized rate, that figure is less useful this quarter because the economy is unlikely to experience another collapse like it did in the second quarter.

Still,, while a tailspin at the second quarter rate is unlikely, the nascent recovery that began appearing earlier this summer appears to be in jeopardy.On Wednesday, Federal Reserve Chair Jerome H. Powell warned that the most recent surge in infections has begun to weigh on the economy, while reemphasizing that a recovery can’t be sustained unless the virus is under control. “We’re still digging out of a hole, a really deep hole,” said Ben Herzon, executive director of IHS Markit. “The second quarter figure will just tell us the size of the hole we’re digging out of, and it’s a big one.”

https://www.washingtonpost.com/business/2020/07/30/gdp-q2-coronavirus/

[mahatmakanejeeves]

2. Thanks, and good morning.

Last edited Thu Jul 30, 2020, 10:46 PM - Edit history (1)

The WaPo got the story right. My original OP did not. I have edited it to correct it.

[BumRushDaShow]

5. Good morning and happy Friday Eve.

Watching the Mars mission and the GDP at the same time. One going up and the other going down.

(the Atlas 5 just had a successful separation from the Mars module, so it has completed its job)

[ProudMNDemocrat]

3. Let us wait for Trump to spin this as FAKE NEWS.

The true jobs numbers and Unemployment levels will surely close to double what is is right now. These numbers will not be good for Trump's re-election . The reality is , Corona has sunk Trump.

[gab13by13]

7. Trump's stupidity sunk Trump.

South Korea got the virus the same day we got it and South Korea has 300 deaths and people in the stands watching baseball games.

[still_one]

4. Maybe the f**king republicans will now get off their fat asses, and extend the unemployment

benefits

So tired of these assholes like Peter Navaro, trump, and the republican rank and file along with a good number of some of those f**king Wall Street analysts parading on the financial networks telling us about the faux "V shaped" recovery

The republicans have mishandled the trump virus, the economy, even before the impact of the pandemic by creating unecessary trade wars, dividing the nation with racism, etc. etc. etc.

VOTE DEMOCRATIC PERIOD, and vote early and by mail where you can

[gab13by13]

6. Jerome Powell also said,

that central banks are ready and willing to bail out Wall Street with trillions more dollars which caused the market to go up.

I disagree that it will be right back up in 3 months, that is unless the books are cooked. Many small businesses are gone and aren't coming back in 3 months. Wait until sports is canceled in the US and schools can't reopen. Our economy is going to continue to decline until we conquer step #1 in beating the virus, more testing with same day results. If Republicans stiff workers in this latest relief bill people are going to end up homeless and hungry.

I don't even watch cable news money programs any more, it's all Kabuki theater. The stock market was artificially propped up by trillions of dollars from the Fed and central banks and interest rates can't be lowered any more unless we go negative. I just don't see that V recovery until the virus is restrained and remember, 3 months from now we will be in flu season.

[still_one]

8. Hey Larry Kudlow, where is your f**king V recovery?

[UpInArms]

9. Economy suffers titanic 32.9% plunge in 2nd quarter, GDP shows, and points to drawn-out recovery

The numbers: An economy badly battered by the coronavirus shrank at a record 32.9% annual pace in the second quarter, underscoring just how big a hole the U.S. finds itself in as it labors to recover from the deepest recession in American history.

The tidal wave of damage from the first global pandemic in a century was almost as bad as Wall Street expected. Analysts polled by MarketWatch had forecast a whopping 35% decline in gross domestic product, the official scorecard of the U.S. economy.

The economy began to recover in mid-May after a severe contraction at the beginning of the quarter, but the U.S. faces a long road back, analysts say. Millions of Americans are still out of work, thousands of businesses have closed and many of those that remain open have had to scale back operations because of tepid demand or ongoing government restrictions.

... snip ...

Previously GDP had never shrunk by more than 10% in any quarter since the government began keeping track shortly after World War Two.

More at ...

https://www.marketwatch.com/story/economy-suffers-titanic-329-plunge-in-2nd-quarter-gdp-shows-and-points-to-drawn-out-recovery-2020-07-30?mod=article_inline

It’s going to be difficult to hide that hole in the economic foundation

[mahatmakanejeeves]

11. Sheesh. MarketWatch is not mincing words.

Thanks, and good morning.

[UpInArms]

12. No mincing ...

Good morning, my friend ☕️

[Yavin4]

10. This is why we need a UBI

for at least 3-6 mos. Just need to accept that the economy has shut down due to the virus.

[jayfish]

13. "crushed by coronavirus lockdowns"

BS headline.

[FBaggins]

15. How so?

There's no question that the vast bulk of the decline is due to ordered shutdowns of business activity.

We can point out that they are necessary... but we can't pretend that they aren't what caused the decline.

[progree]

17. Thanks, saved me the effort. n/t

[KY_EnviroGuy]

14. Germany also just reported deepest decline on record......

German economy sees deepest decline on record
By Andrew Walker
BBC World Service economics correspondent

Link: https://www.bbc.com/news/business-53592594

Snips....

The German economy shrank at its fastest rate on record amid the impact of the coronavirus pandemic, according to new official figures. The total production of goods and services declined by 10.1% during the April-to-June period.

It was the sharpest decline since German began producing quarterly growth figures in 1970. The contraction followed a smaller but still severe drop in activity of 2% in the previous three months.

The German economy, in common with most others, has been hit very hard by the pandemic and the restrictions that have been imposed in an effort to contain it.

The country's statistics office said there had been a "massive slump" in household spending, investment in equipment and machinery and in exports and imports.

Thanks for the OP, mahatmakanejeeves. There's a lot of belt-tightening happening around the world.

KY

[tclambert]

26. So our results are about 3 times worse than Germany's?

Hmmm. Must be Obama's fault. Or maybe Hillary's. Can't be Trump, 'cause he's done such a good job. I just saw him on the TV boasting about what a good job he's done.

Besides, the stock market still hasn't crashed. All thanks to Donald Trump.

[KY_EnviroGuy]

28. The numbers actually look to be roughly the same for US and Germany.

I have no expertise at interpreting economic numbers but ours at ~33% annualized rate (= approx. 8% quarterly) would be somewhat less than Germany's news at 10% quarterly = 40% annually. Not sure why our reports quote annualized numbers when the quarterly numbers are highly volatile.

Regardless, it's a very precipitous drop on both sides of the pond and I think consumers are getting more fearful as people shift from a "what I want" mode to a "what I need" mode.

But you are right. Trump's lies, hubris and refusal to accept any responsibility is very dangerous and keeps the nation in denial.

More than ever, what we need now is truth, humility and honesty. Unfortunately for us, the GOP is entirely void of all those characteristics.

Thanks for bringing that issue to light. I honestly had not noticed that discrepancy in those reports.

KY

[tclambert]

29. Oh, I didn't spot one was quarterly and one was annualized.

So I was comparing apples to orangutans.

[mahatmakanejeeves]

31. That's my fault. I foolishly didn't notice that Yahoo! Finance, which was my original source,

reported the -32.9% figure as if it were quarterly, rather than annualized. I should have resisted the urge to post and waited for BumRushDaShow. He linked to the Washington Post in the first reply to this thread. The Washington Post got the numbers right. The change for the quarter was -9.5%.

I figured out several hours later what I had done. I edited the OP to get the numbers right.

WaPo link

The graph in this post is correct too:

Here's another graph (from NYT)

I apologize for my error. It was a rookie error, plain and simple.

[progree]

16. Surprising that Dow is down 488 points 957a ET. I thought it would be soaring because GDP

drop wasn't as bad as expected. Hasn't that been the pattern for months? Some horrible horrible economic statistic is released, but it wasn't as bad as expected, so Dow adds 200, 500, 1000 points on unexpectedly good horrible news.

[mahatmakanejeeves]

18. you can't miss the wreckage left by the last 2 GOP presidents

you can't miss the wreckage left by the last 2 GOP presidents

Link to tweet

[progree]

20. "Hardship builds character" -Trump

(made up quote)

[progree]

19. Median forecast for MarketWatch's poll of 15 economists for Q3: +18.0% ann rate

https://www.marketwatch.com/economy-politics/calendar

in the GDP Forecasts section in the bottom of the page.

Three months from today, just a week before the election, it will be right back up by the same amount.

If the 18.0% annualized rate increase in Q3 holds true, it will be a long way from making up for the 32.9% (annualized rate) Q2 decline.

It takes a larger percentage increase to offset a given percentage decrease. For example if something goes from 3 to 2, it has declined 33%. If it goes back up from 2 to 3, it has increased by 50%. So a 50% increase is needed to negate a 33% decline.

The first estimate of Q3 GDP comes out Thursday October 29. The election is 5 days later, on Tuesday Nov. 3. Though a large percent will have likely voted before then -- absentee / mail in ballots.

But then the evil madman will claim that the 18% increase is the greatest increase in history, and he will probably be right.

https://www.marketwatch.com/economy-politics/calendar
The median forecasts that MarketWatch publishes each week in the economic calendar come from the forecasts of the 15 economists who have scored the highest in our contest over the past 12 months, as well as the forecasts of the most recent winner of the Forecaster of the Month contest.

[Sunlei]

21. wait until the banks start the home mortgage nonpayment evictions process next month

evictions piled up on bank lenders Lawyers desks waiting for the emergency regulation to expire


all the Republicans can't wait to get their hands on thousands of foreclosed homes for pennies on the dollar

[mahatmakanejeeves]

22. Trump "has a great story to tell on how he turned our economy ... around." - @NikkiHaley

Aaron Rupar Retweeted

Trump “has a great story to tell on how he turned our economy ... around.” -
@NikkiHaley

Link to tweet

[Javaman]

23. is this part of all the winning we would be tired of by now? nt

[BumRushDaShow]

24. Here's another graph (from NYT)

(from one of their "live" columns - https://www.nytimes.com/live/2020/07/30/business/stock-market-today-coronavirus)

[mahatmakanejeeves]

25. White House: U.S. Economy Remains Resilient Despite Historic Contraction in Second Quarter

ECONOMY & JOBS

U.S. Economy Remains Resilient Despite Historic Contraction in Second Quarter
July 30, 2020 4 minute read

Today, the Bureau of Economic Analysis (BEA) released its advance estimate of U.S. GDP for the second quarter of 2020 reflecting the months of April, May, and June. Real GDP contracted at an unprecedented annualized rate of -32.9 percent—the largest quarterly decline since the series began in 1947—slightly better than what market and official estimates had expected. Despite this massive contraction, the resiliency of the U.S. economy and the swift fiscal response of the Federal Government can aid in a strong recovery.

{snip}

The magnitude of this contraction reflects the gravity of the economic sacrifice Americans made to slow the spread of COVID-19 and prevent greater tragic loss of life and health. The country mitigated pressures on hospital capacity and allowed medical professionals the time to learn how to more effectively treat this disease. The Trump Administration will continue to support America as we build a bridge to the other side of this crisis.

[ucrdem]

30. Next quarter will be worse, and the numbers should come out . . .

one week before election day.

[Maxheader]

32. A bunch of western European countries are reporting..

20% and more revenue losses...This is where the worlds wealthy need to step up to the plate and offer

food to those without...utility bills paid for those laid off...etc...And for good fucking reason..

those people owe US their wealth...their status...

[progree]

33. Here we go again with idiots from Reuters leaving out the "rate", this time Q2 productivity

among many others, in this first class shitty article.

In brief, this follows a common pattern: the title is incorrect because they leave out rate/pace/annualized whatever. But they included "rate" in the very first line of the article, so not terribly bad so far.

But further on in the article, it reports "an astonishing 32.9% plunge in second-quarter gross domestic product", leaving off rate. As we all know by now, Q2 GDP actually plunged 9.5%, which works out to a 32.9% annualized rate.

It also says "output decreased 38.9%, also the biggest decline ever recorded as hours worked fell 43%" and "Labor costs also jumped, rising 12.2%", and leaves off "rate" in all of these.

https://finance.yahoo.com/news/us-productivity-rises-7-3-124317647.html

US productivity rises 7.3% as hours worked are nearly halved, Reuters, August 14, 2020

U.S. productivity rose at a 7.3% rate in the second quarter as the number of hours worked fell by nearly half, the biggest drop-off since the government started tracking the data more than 70 years ago.

The Labor Department said Friday that output decreased 38.9%, also the biggest decline ever recorded as hours worked fell 43%, with the coronavirus pandemic sowing economic damage throughout the U.S.

The increase in productivity was the largest since 2009. Labor costs also jumped, rising 12.2%.

Friday's report is the first estimate of second-quarter productivity and follows the first quarter’s 0.3% decline. The rise in labor costs, the largest since 2014, follows a 9.8% increase in the January-March quarter. ((these are all almost certainly annualized rates in this paragraph, but I'm too lazy to check --Progree))

... Last month, the government reported an astonishing 32.9% plunge in second-quarter gross domestic product, the value of goods the country produced in the April-June quarter.

As always, check the original source --

(that's why I built the megathread in my sigline ( http://www.democraticunderground.com/111622439 ), though embarrasingly, I don't have this one, the productivity report, except secondarily, I will correct that.)

BLS: https://www.bls.gov/news.release/prod2.nr0.htm 8/14/20

Nonfarm business sector labor productivity increased 7.3 percent in the second quarter of 2020, the
U.S. Bureau of Labor Statistics reported today, as output decreased 38.9 percent and hours worked
decreased 43.0 percent. (All quarterly percent changes in this release are seasonally adjusted annual
rates, and show what the percent change would be if the quarterly rate continued for four quarters.) In
the four quarters from the second quarter of 2019 to the second quarter of 2020, productivity increased
2.2 percent, reflecting an 11.8-percent decrease in output and a 13.7-percent decrease in hours worked.
(See table A1.)

Unit labor costs in the nonfarm business sector increased at an annual rate of 12.2 percent in the second
quarter of 2020, following an increase of (blah blah blah)

...

Table A1. Labor productivity growth and related measures - preliminary second-quarter 2020
(percent change from previous quarter at annual rate and from same quarter a year ago)
((can't copy and paste table because DU software compresses all sequences of spaces into one. too lazy to Imgur it -Progree))

Edited to add - I finally Imgur'd Table A1 -- see post below (#34)

[progree]

34. Here's Table A1 of the productivity report, since I brought it up

I decided to go ahead and Imgur it. I suppose I ought to dump it in a spreadsheet and calculate the corresponding actual (i.e. non-annualized) numbers (or dig in the report for them, they might be somewhere in some far-below table), but anyway, the productivity report has a lot of stats that are a perfect complement to the Q2 GDP report that came out July 30 (after all it's the same quarter that is being talked about)

Q2 GDP report:

https://www.bea.gov/data/gdp/gross-domestic-product
https://www.democraticunderground.com/10142549435

That GDP report featured a 32.9% drop in Q2 GDP on an annualized basis that works out to be a 9.5% actual drop

https://www.bls.gov/news.release/prod2.nr0.htm (link is in the OP), Table A-1

I left out the last part of Table A-1 - which is the breakdown of manufacturing into durable manufacturing and non-durable manufacturing)

Sorry about the fine print. Importantly, in the line below the title, it says,
"percent change from previous quarter at annual rate and from same quarter a year ago"



mahatmakanejeeves created a productivity post in the Economy Group

BLS Report: Productivity increases 7.3% in Q2 2020; unit labor costs rise 12.2% (annual rates)

https://www.democraticunderground.com/111689162