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The U.S. economy shrank at a dizzying 32.9% annual rate in the April-June quarter — by far the worst quarterly plunge ever — when the viral outbreak shut down businesses, throwing tens of millions out of work and sending unemployment surging to 14.7%, the government said Thursday.
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The Commerce Departments estimate of the second-quarter decline in the gross domestic product, the total output of goods and services, marked the sharpest such drop on records dating to 1947. The previous worst quarterly contraction, a 10% drop, occurred in 1958 during the Eisenhower administration.
Last quarters drop followed a 5% fall in the January-March quarter, during which the economy officially entered a recession triggered by the virus, ending an 11-year economic expansion, the longest on record in the United States.
The contraction last quarter was driven by a deep pullback in consumer spending, which accounts for about 70% of economic activity. Spending by consumers collapsed at a 34.6% annual rate as travel all but froze and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.
Business investment and residential housing also suffered sharp declines last quarter, with investment spending sinking 27% and residential housing plunging 38.7%.
State and local government spending, diminished by a loss of tax revenue that forced layoffs, also fell at an annual rate of 5.6%.
But overall government spending was up 2.7%, powered by a 17.4% surge in federal spending, reflecting the more than $2 trillion in relief packages that Congress enacted to provide $1,200 payments to individuals, aid to small businesses and supplemental unemployment benefits.
The job market, the most important pillar of the economy, has been severely damaged. Tens of millions of jobs vanished in the recession. More than 1 million laid-off people have applied for unemployment benefits for 19 straight weeks. So far, about one-third of the lost jobs have been recovered, but the resurgent virus will likely slow further gains in the job market.
President Donald Trump has pressured states to reopen businesses despite concerns that the virus remains a threat to workers and customers at many service industry jobs that require frequent face-to-face contact.
So dizzying was the contraction last quarter that most analysts expect the economy to produce a sharp bounce-backRead More – Source
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