The coronavirus pandemic has proven damaging to the United States economy — but the worst might be yet to come.
According to the Commerce Department, the country’s gross domestic product, which measures the output of U.S. goods and services, contracted at a seasonally adjusted annual rate of 5% in the first three months of the year. It was the agency’s final estimate and unchanged from its forecast released a month ago.
The figure marked the economy’s sharpest quarterly plunge since the 8.4% fall in the fourth quarter of 2008 at the height of the Great Recession.
Starting mid-March, the COVID-19 outbreak forced the closures of businesses, offices and stores from coast to coast, as well as limited travel, over the course of several weeks.
Americans are also holding onto cash on fears of another financial crisis, particularly as employers across the board have resorted to furloughs and layoffs that left a staggering 47 million people unemployed over the course of a 14-week period. Last week alone, 1.48 million people in the U.S. filed initial jobless claims — worse than the 1.35 million predicted by Wall Street.
Although all states have started to reopen in phases, economic activity is still well below levels prior to the pandemic, which has sickened more than 2.38 million people in the country and killed at least 122,000. (Economic growth was at or above 2% until mid-March.)
Federal Reserve officials and private-sector economists are expecting a much worse decline in the next quarter, which counts the months of April — majority of which the entire country spent on lockdown — through June. Some forecasts put the GDP drop at a nearly 30% annual rate.
In an effort to boost the economy, President Donald Trump in late March signed a $2 trillion stimulus package promising direct payments and unemployment benefits to millions of Americans, as well as financial aid to states and businesses. It marked the third of three federal economic relief bills, counting two coronavirus bailout plans worth a respective $192 billion and $8 billion. However, the central bank’s chairman, Jerome Powell, has said on multiple instances that the U.S. economy requires additional funding from the White House and Congress to weather the outbreak.