U.S. gross domestic product—a measure of the value of all the goods and services produced by the economy—declined 4.8% in the first three months of 2020, according to data released by the Commerce Department; this is the worst quarterly decline in a decade, but experts agree that the numbers haven’t even begun to reflect the scope of the economic damage caused by the coronavirus.
The sharp contraction in GDP reflects the economic toll that measures intended to contain the coronavirus, like social distancing, layoffs, and business closures, have taken on the American economy.
Economic output hasn’t shrunk at all since the beginning of 2014, when it fell 1.1%, and there hasn’t been a drop this steep since the height of the Great Recession in 2009.
After an 11-year period of strong economic performance, temporary unemployment claims ballooned to more than 26 million in a matter of weeks as the coronavirus crisis took hold.
Experts were predicting a contraction of about 4% for the first quarter, and there is widespread consensus that next quarter’s numbers will be even more dire.
Last week, the Congressional Budget Office predicted that GDP growth will plunge a jaw-dropping 40% in the second quarter from the same time last year; the CBO also predicts that growth will slow 11.8% from the first quarter, which would be the biggest loss since the Commerce Department began tracking GDP data in 1947.
“Prior to the coronavirus shock, the economy was doing relatively well,” Gregory Daco, chief U.S. economist for Oxford Economics, told NPR. “The shock that we experienced in the second half of March actually has led to a sudden stop in spending on a lot of services and even spending on some goods.” Unfortunately, Daco said, that shock is “only the tip of the iceberg.”
$3.7 trillion. That’s how high the Congressional Budget Office expects the federal budget deficit will be by the end of the current fiscal year after a month of historic government spending on emergency rescue initiatives like the CARES Act.
What to watch for
Officials from the Federal Reserve will conclude a two-day meeting on Wednesday afternoon. Over the last month, the Fed has rewritten its playbook and made unprecedented interventions to prop up the economy. It’s announced new emergency initiatives worth trillions of dollars, including programs that will extend its reach to small and midsize businesses, as well as state and municipal governments—both unprecedented interventions into markets the Fed has historically avoided. It also cut rates to nearly zero, stepped in to backstop a $350 billion emergency small business loan program administered by the Small Business Administration, and purchased billions of dollars’ worth of government debt and mortgage-backed securities. More action is expected this afternoon.
I’m a breaking news reporter for Forbes focusing on capital markets and finance. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.
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