U.S. GDP Drops Sharply, Job Losses Continue to Rise

By:
Chris Gaetano
Published Date:
Jul 30, 2020
The U.S. Commerce Department reported that the economy has shrunk dramatically since the last quarter, while at the same time the Labor Department said that job losses rose for the second week in a row.

The Commerce Department's Bureau of Economic Analysis reported that real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, a huge decline, compared to a 5 percent fall in the first quarter. The report attributed the decline to decreases in consumer spending, exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending.

While the report seems as if it is saying the country has lost more than one third of its economy, the Washington Post noted that the data is annualized, that is, short-term performance or results were used to forecast the performance for the next 12 months. So, said the Post, the 32.9 percent figure is more about assuming that quarter-to-quarter GDP losses continue at a compounding rate. The actual first-to-second quarter GDP drop was a less apocalyptic, but nonetheless quite dismal, 9.5 percent.

The U.S. Labor Department, meanwhile, reported that 1.434 million more people last week applied for jobless benefits, a shade higher than last week's 1.4 million which, itself, represented the first time the figure had increased after steadily lowering over many weeks. New York state made up 85,000 of these new applications, a high that was still outdone by California (249,007), and Florida (87,062) placing the Empire State just over Georgia (84,581).

The $600 supplemental weekly unemployment payments, a key part of the CARES Act, have now expired. Congress is currently engaged in negotiations to replace the program. The Republican plan, released just this week, involves cutting the benefit down to $200 until state governments can find a way to ensure that beneficiaries make no more than 70 percent of what they made at their jobs before. The Democratic plan, in contrast, would extend the $600 weekly benefit until the end of the year.

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