This week, a slew of data showed just how much the coronavirus pandemic and lockdowns to curb the spread of disease have damaged the US economy.
Many economic indicators released this week posted record slumps, fell to lows not seen in years or decades, or surpassed data from the Great Recession of 2007-2009.
“For awhile, we are going to be in territory that was just unthinkable,” Heidi Shierholz,a senior economist at the Economic Policy Institute, told Business Insider. In comparison to the Great Recession, the current situation is a much more rapid deterioration, she said.
For example, the worst weekly jobless claims report during the Great Recession showed fewer than 1 million Americans filed for unemployment insurance — now, the US is seeing sustained weeks of millions of claims. “We’re just in this extraordinary space,” Shierholz said.
The great lockdown
Over the course of the last four weeks, the US has shut down large parts of its economy to curb the spread of COVID-19, the illness caused by the new coronavirus. That’s meant banning nonessential businesses and asking consumers to stay at home and practice social-distancing.
For many economists, a US recession spurred by the coronavirus pandemic is a foregone conclusion. Many are forecasting staggering declines in US gross domestic product in the second quarter — JPMorgan economists are expecting a 40% drop. That could send the unemployment rate to 20% in the April jobs report, nearing the all-time high of 24.9% seen during the Great Depression.
There have been efforts by the government to effectively press pause on the US economy until it can eventually reopen. President Donald Trump signed a $2 trillion coronavirus relief act at the end of March that included expanded unemployment, aid for businesses, and direct $1,200 checks to many Americans. There is potentially more aid on the way — on Thursday, the Small Business Administration ran out of relief funding, having exhausted $349 billion in just two weeks.
The Federal Reserve has also gone beyond its Great Recession toolkit to provide support to state and local governments and more. Fed Chairman Jerome Powell has shown that the central bank has a “do whatever it takes” approach to boosting the US economy.
What will recovery look like?
Still, as more data is released, the dire situation in the US is becoming more clear. And, there could be more pain ahead as lockdowns continue. While President Trump said he’d offer guidelines for states to begin reopening economies, the entire country won’t be back in action at once. On Thursday, New York Gov. Andrew Cuomo said that the state’s stay-at-home order would be extended to May 15 instead of April 30.
Now, economists are watching to see just how bad the situation gets before the US can safely reopen its economy and begin a recovery. While President Trump has boasted of a quick rebound, economists aren’t so sure. It’s more likely any recovery will take a more gradual U-shape instead of a V-shape, especially if consumer spending remains depressed.
“A V-shaped recovery is pretty low on my list likely outcomes,” Seth Carpenter, chief US economist at UBS, told Business Insider. When the worst is over, the US will go back to growth, but it will be “tepid because you’re balancing out the natural instinct of a rebound with a bunch of caution from the households and businesses,” he said.
Here’s all the economic data released this week that show the full impact of the coronavirus pandemic on the US:
1. Retail Sales
The decline in retail sales came as the coronavirus pandemic and strict bans of nonessential business froze consumer wallets. Clothing and accessories led the fall, down 50.5% from the previous month. Furniture sales dropped nearly 27%, restaurant sales fell 26.5%, and motor vehicles and parts slipped 25.6%. Sporting goods, hobby, and book stores, gas stations, and other miscellaneous retailers also posted double-digit declines in just one month.
Food and beverage stores were one bright spot, gaining 25.6% from February, as US consumers stocked up on supplies for the coronavirus lockdown.
2. Industrial Production
Industrial production and manufacturing output posted their largest declines this month since 1946, the Federal Reserve said in a Wednesday report. Manufacturing output fell 6.3% in March, while total industrial production fell 5.4%.
The decline was led by motor vehicle output, which slid 28% in March, according to the report. Utilities fell 3.9%, while mining output slumped 2% in the month. Across market groups, all recorded declines in March, the report showed.
3. Jobless Claims
US weekly jobless claims were 5.2 million for the week ending April 11, the Labor Department said in a Thursday report. Claims declined slightly from the previous week, when 6.6 million Americans filed for unemployment insurance.
While this showed a positive declining trend, it brought the four-week total of displaced American workers filing for unemployment to 22.03 million. That means that coronavirus-related layoffs have effectively erased the 22 million jobs that the US economy added since the post-Great Recession recovery starting in mid-2009.
4. Housing Starts
It shows that the housing market has deteriorated rapidly amid the coronavirus pandemic. Homebuilders had been operating at decade highs as recently as January before the global health crisis forced business closures and outsized job loss, and signaled a likely recession would soon hit the US.
5. Consumer Sentiment
The University of Michigan’s consumer-sentiment index plunged by 18.1 points, to 71, in early April, according to preliminary data released April 9. Over the past two months, the index has slumped 30 points, roughly 50% larger than the record.
“The free-fall in confidence would have been worse were it not for the expectation that the infection and death rates from covid-19 would soon peak and allow the economy to restart,” Richard Curtin, the chief economist for the Surveys of Consumers, said in a statement.
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