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United States takes one-third cut in GDP in second quarter

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Posted: Saturday, August 1, 2020. 9:23 am CST.

By Aaron Humes: The world’s most influential economy took severe hurt in the second quarter, according to Al-Jazeera.

The United States’ Bureau of Economic Analysis reported a 32.9 percent drop in gross domestic product for the months of April, May and June, when most of America was in COVID-19 related lockdown. The first quarter saw a drop of 5 percent year-over-year; Belize lost 4.5 percent in the same period according to our Statistical Institute of Belize (SIB) which has yet to release second-quarter figures.

It is America’s worst contraction in 70 years; the first quarter of 1950 saw a loss of ten percent.

Al-Jazeera reports a sharp contraction in consumer spending, which drove 2/3rds of U.S. economic activity, as well as a plunge in exports, inventories, business and residential investment, as well as state and local government spending.

Most economic activities halted in the U.S. and around the world as authorities gamely fought to contain the spread of COVID-19. To help the newly jobless, the U.S. Federal Reserve pumped trillions of dollars into the economy to support businesses and households and Congress approved $3 trillion in relief aid spending.

Brief economic recovery with the easing of lockdown restrictions in May and June was effectively wiped out by a sudden resurge of infections in key U.S. states, particularly in the South and West.

30 million Americans are currently collecting unemployment benefits from state and federal programs and another 1.434 million filed for such benefits in the week ending July 25 according to the Bureau of Labour Statistics, the second consecutive rise in weekly jobless claims since the labor market bottomed out in March. Federal Reserve Chairman Jerome Powell noted during a press conference on Wednesday that the rise in joblessness has been “especially severe for lower-wage workers, for women, and for African Americans and Hispanics.”

The Fed chair also said that data is showing that on balance, the pace of the recovery appears to be slowing and that whatever path the economy takes will depend “to a very high extent on the course of the virus.”

But there is a fight in Congress over how to extend or even to keep the $600 top-up, or combine it to a cap of 70 percent of prior wages and a top-up cap of $500 a week.

Belize is one of America’s biggest trading partners, mainly in sugar, and the thousands of Belizeans living there send the most remittances home to equally suffering family members here. Belize is also counting on the flow of U.S. tourists to pick up in the second half of the year once the Philip Goldson International Airport (PGIA) reopens on August 15.

 

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