WASHINGTON (Dispatches) -The U.S. economy shrank by a stunning 9.5 percent from April through June, a historic contraction and a stinging reminder of how much was lost in such a short period.
The drop in gross domestic product was the fastest the quarterly rate has fallen in modern record-keeping. As the ground beneath the economy buckled amid the coronavirus pandemic, tens of millions of jobs were erased, businesses were gutted and the future of the economy became further intertwined with an uncontrolled public health crisis.
With that pain still fresh for millions of Americans, economists say the second quarter stands as an urgent warning for what is at stake if the vestiges of a recovery from earlier this summer vanish. While Congress clashes over another stimulus bill and the virus forces more states to shut down bars and restaurants again, there is mounting fear that the economy could be held back even more, making a true recovery much more fraught.
On Thursday, the government also reported that jobless claims increased once again last week to 1.4 million, another sign that any recovery is stalling.
GDP shrank at an annual rate of 32.9 percent, according to the Bureau of Economic Analysis, the agency that publishes the statistics on quarterly economic activity. Although it usually stresses the annualized rate, that figure is less useful this quarter because the economy is unlikely to experience another collapse like it did in the second quarter.
Still, while a tailspin at the second-quarter rate is unlikely, the nascent recovery that began appearing earlier this summer appears to be in jeopardy.
On Wednesday, Federal Reserve Chair Jerome H. Powell warned that the most recent surge in infections has begun to weigh on the economy, while reemphasizing that a recovery cannot be sustained unless the virus is under control.
Thursday’s report helps explain which parts of the economy suffered as people stayed home, cut back their spending and suddenly overhauled their routines. With retail stores shuttered and people swapping out their work wardrobes for leisurewear, clothing and footwear sales dropped. The pandemic also triggered a collapse in oil prices, exacerbated by lower gasoline sales and dampened transportation services, as Americans stayed home and avoided commutes or basic errands.