The U.S. economy grew at a record pace in the third quarter when business opened from the coronavirus shutdown, but the nation remained in a deep hole from the COVID-induced recession.
Gross domestic product, the broadest measure of goods and services produced in the entire economy, rose 33.1% year-on-year for the three-month period from July to September, the Commerce Department said in a first reading of the data on Thursday. The previous record after World War II was an increase of 1
Refinitiv economists expected the report to show that the economy had expanded by 31%.
But the headline blurs the overall picture: The economy is shrinking at an annual revised rate of 31.4% in the previous quarter, the largest decline in modern American history. Looking at the quarterly data, the country’s GDP grew by 7.4% from the second to the third quarter, compared with a 9% decline between the first and second quarters.
The economy remains 3.5% smaller compared to the end of 2019.
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“The economy in the third quarter will still be far below what it was before COVID, so much so that the depth of the recession, even after this record growth, will still be as deep as a very deep recession, like the recession in 2008, “Justin Wolfers, an economist at the University of Michigan, told FOX Business.
The Ministry of Commerce calculates GDP on a quarter-on-quarter basis, as if this level of growth is maintained throughout the year; during huge fluctuations up or down, this can exaggerate both the decline in growth and the subsequent recovery.
Because third-quarter growth is measured against second-quarter growth — a historically low baseline — any rebound in general would generate huge growth. The U.S. economy nearly stopped earlier this year to slow the spread of the new coronavirus, which infected more than 9 million Americans and killed more than 227,000, the world’s largest.
“Although GDP has reached relatively high this quarter, we must keep in mind that this class comes with a big curve – this is really a benchmark against the drastic hole from which we started to emerge in [the second quarter], “said Steve Rick, chief economist at CUNA Mutual Group.
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Yet the Trump administration has made a circle of victory in terms of GDP, citing it as “the absolute validity of President Trump’s policies that create jobs and opportunities for Americans everywhere in the country.”
“The president has built the best economy in the world once and is doing it quickly again, proving that cutting taxes and cutting regulations and bureaucracy are clearing the way for American ingenuity and our entrepreneurial spirit to flourish,” Trump’s director of communications said in a statement. 2020 Tim Murto.
Growth in the third quarter was driven by a resurgence in consumer spending, which accounts for approximately two-thirds of the country’s GDP, as countries eased easing measures in the summer and employers hired their workers. Personal consumption increased by 40.7%, a record for the last quarter. Business investment and housing also made strong profits.
But economists worry that growth has begun to pick up in the last three months of the year amid a jump in new COVID cases and a lack of a new round of government relief. (In Europe, rising levels of infection have led to a new round of restrictions).
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For months, Congress has struggled to reach an agreement on another round of emergency relief for families and businesses – negotiations first collapsed in early August, prompting Trump to sign four implementing measures designed to provide relief to families who are still struggling. shaken by the crisis caused by the virus, including a temporary extension of additional unemployment benefits to $ 300 a week.
But the bailout, which helped the economy in the early weeks of the pandemic, such as the $ 670 billion payroll program, a one-time $ 1,200 incentive check and sweetened unemployment benefits, expired months ago.
On top of that, millions of laid-off workers could lose their unemployment benefits completely by the end of the year, with the increased unemployment benefits approved by Congress in March expiring on December 31st.
“We are in dire need of an additional fiscal stimulus to help build a bridge for people to get through this recession and fight the accelerating financial disaster,” Rick said.
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