US economy by far faces the worst plunge in the April-June quarter. The economy shrank by 33 per cent annual rate in the quarter as the businesses had to shut down due to the virus outbreak. which lead to lay off of millions and unemployment surging to 14.7 per cent, said the government on Thursday.
The US economy has faced its worst quarterly contraction of a 10 per cent drop in the year 1958 during Eisenhower administration. According to the estimates of commerce department decline in the GDP of the second quarter is marked the sharpest on records dating to 1947.
The drop in April-June quarter was followed by a 5 per cent drop in the January-March quarter when the economy officially entered a recession triggered by the virus, that caused an end to an 11-year economic expansion, the longest on record in the US.
Consumer spending which accounts for 70 per cent of economic activity is what that pulled back the economy in the last quarter. The customer’s spending reduced by almost 34 per cent annual rate as all economic activities froze and restaurants bars, entertainment venues and other retail establishments were forced to close. Business investment and residential housing also suffered declines in the last quarter.
The most severely damaged was the job market which is known as the most important pillar of the economy. Tens of millions of job vanished resulting in unemployment and layoffs. Unemployment benefits for straight 18 weeks were applied by laid-off people. However, one-third of the jobs lost have been recovered, but the virus which is reviving is likely to slow the growth in the job market.
Despite the concerns that remain regarding the virus spread, which can be a threat to workers and customers at many service industry, that requires frequent face to face contact, Donald Trump, US President forced the states to reopen the businesses. The Trump administration is betting that economy will undergo a V-shaped recover in which plunge will be followed by a successful rebound in the current quarter that would be reported in late October, not long before election day.