WASHINGTON — The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.
The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.
The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.
Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.
The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.
While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.
Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.
“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”
In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.
“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.
“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.
The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.
So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.
The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.
Martin Crutsinger, The Associated Press
Poll: Virginia voters say virus, not economy, most important – 570 News
FALLS CHURCH, Va. — Enacting restrictions to prevent the spread of the coronavirus is more important than removing them to get the economy going, according to a majority of Virginia voters polled this month.
The poll conducted by Hampton University and The Associated Press-NORC Center for Public Affairs Research found that 62% think the biggest priority for their community is to prevent the coronavirus from spreading, even if it hurts the economy, while 35% said removing restrictions to help the economy, even if more people get the virus, is the bigger priority.
John Bordeaux, 61, of Lorton, is among those who said controlling the virus is a greater priority. He said he’s worried that younger people are willing to risk prolonged potential exposure at bars and other indoor gathering places, just because statistics show that older people are more vulnerable.
“I don’t think we know enough to make that assessment,” particularly when it comes to how the virus is transmitted, said Bordeaux, a policy researcher.
Paul Gilbert said he’d rather see restrictions removed, if he had to choose, but that those two opposing choices don’t really reflect his thinking. More than anything, he said, he just wants the choices to be guided by science rather than politics, wherever that leads.
“If we don’t get out of this thing, there’s not going to be an economy to worry about,” said Gilbert, 42, a disabled veteran from Suffolk.
Like other states, Virginia has debated the degree to which the economy and society should be open as the pandemic stretches on, and the coronavirus response has been a key issue in the presidential campaign. In Virginia, the politics of that debate have featured frequent barbs from President Donald Trump directed at Democratic Gov. Ralph Northam.
In April, during some of the strictest coronavirus restrictions, Trump tweeted “LIBERATE VIRGINIA,” an apparent reference to both gun control measures and COVID-19 restrictions. While both Trump and Northam, a physician, contracted the coronavirus, Trump has pushed for a “return to normal” and mocked the use of masks to prevent the virus’s spread, while Northam has advocated masks and other measures to keep the virus in check.
Perhaps unsurprisingly, then, respondents’ views on the coronavirus reflect a partisan divide. About 9 in 10 Democrats emphasized the importance of using restrictions to stop the virus from spreading. About 7 in 10 Republicans emphasized the importance of removing virus restrictions to help the economy.
The poll shows that between September and October, the standing of Northam and other Democrats improved somewhat. Northam’s favourability rating is now 49%, up slightly from 42% of those responding to a Hampton University/AP-NORC poll last month.
The Democratic presidential ticket of Joe Biden and Kamala Harris showed similar improvements. Biden’s favourability rating ticked up slightly, from 47% to 52%, while positive ratings of Harris increased somewhat from 42% to 50%.
Positive views of Trump, meanwhile, remained roughly the same: 39% say they have a favourable opinion of the president, similar to 37% last month.
The poll also shows a significant shift in voting plans, with more people saying they plan to cast their ballot in person before Election Day. Voters have seen long lines at early polling places across the state in recent weeks.
In September, 54% said they would vote in person on Election Day, and 13% said they planned to vote early in person. The October poll showed just 39% planning to vote on Election Day, with another 31% planning to vote early in person.
Roughly 3 in 10 Virginia voters in both polls indicated plans to vote by mail.
The poll shows a deep divide between Republicans and Democrats about how they plan to vote, which might influence how returns come in on election night.
About 8 in 10 Democrats say they’re voting in advance of the election, including about 4 in 10 by mail and about another 4 in 10 early in person. By contrast, about two-thirds of Republicans say they will vote in person on Election Day.
About two-thirds of those who say they plan to vote on Election Day cite concerns over the counting of mail-in ballots as a major factor. Those planning to vote early in person cite a mix of factors, including concerns about counting mail-in ballots, the coronavirus and long lines on Election Day.
The AP-NORC/Hampton University poll of 887 registered voters in Virginia was conducted Oct. 6-12 by mail, with the option for respondents to take the survey online or by phone. The margin of sampling error for all respondents is plus or minus 4.6 percentage points.
AP-NORC Center: http://www.apnorc.org/.
Matthew Barakat, The Associated Press
China’s New Growth Plan May Push Economy Past U.S. Within Decade – BloombergQuint
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An innovative economy requires an innovative government – The Hill Times
Government’s job is to empower rapid innovation in the private sector, not control it. Promote a new wave of digital-first ADMs and DMs across departments and prioritize candidates who have worked in high growth SMEs, and who value competition and competitiveness in everything they do, writes ISG Senator Colin Deacon. The Hill Times photograph by Andrew Meade
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