The longest economic expansion on record has been brought to a screeching halt.
According to the Commerce Department, the United States’ gross domestic product — a measure of the output of goods and services across the economy — contracted at a seasonally adjusted annual rate of 4.8% in the first three months of the year.
It marks the steepest decline since the Great Recession, as the coronavirus pandemic kept large swaths of the country on lockdown over the past seven weeks. Federal regulations around nonessential businesses forced offices to close and stores to shutter, as well as limited travel in and out of the U.S.
Although some states — including Colorado, Georgia, South Carolina and Tennessee — have begun to reopen in phases, economic activity is still well below levels prior to the COVID-19 outbreak. (Economic growth was at or above 2% until mid-March.) Many Americans are holding onto cash on fears of another recession, particularly as employers across the board have resorted to furloughs and layoffs that have left a staggering 26 million people unemployed over the course of a five-week period.
In an effort to boost the economy, President Donald Trump last month signed a $2 trillion stimulus package promising unemployment pay and benefits for millions. The measure is designed to ensure that the jobless will receive weekly pay of $600 for four months on top of state benefits, as well as up to 13 weeks of extended benefits.
However, economists are expecting the GDP to shrink even more in the second quarter, taking into account the month of April — most of which individuals and companies are spending under lockdown. Experts anticipate a rebound in the second half of the year.
This afternoon, Federal Reserve chairman Jerome Powell said that the U.S. economy would need additional funding from the White House and Congress amid the health crisis. In a statement following his appearance at a news conference, the central bank explained that the coronavirus “will weigh heavily on economic activity, employment and inflation in the near term and poses considerable risks to the economic outlook over the medium term.” It added that it would use “its full range of tools to support the U.S. economy in this challenging time.”