This is what happens when you shut down the economy.
About 1.434 million Americans filed unemployment claims last week as states issue another shutdown due to spikes in coronavirus cases.
The GDP also crashed to a 32.9% annualized rate, which is the biggest drop on record. Overall, the GDP dropped 9.5% between the first and second quarters.
But we have to remember the GDP report contains numbers between March and June. It doesn’t tell us what is happening now or tomorrow.
From the Labor Department:
In the week ending July 25, the advance figure for seasonally adjusted initial claims was 1,434,000, an increase of 12,000 from the previous week’s revised level. The previous week’s level was revised up by 6,000 from 1,416,000 to 1,422,000. The 4-week moving average was 1,368,500, an increase of 6,500 from the previous week’s revised average. The previous week’s average was revised up by 1,750 from 1,360,250 to 1,362,000.
The advance seasonally adjusted insured unemployment rate was 11.6 percent for the week ending July 18, an increase of 0.5 percentage point from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending July 18 was 17,018,000, an increase of 867,000 from the previous week’s revised level. The previous week’s level was revised down by 46,000 from 16,197,000 to 16,151,000. The 4-week moving average was 17,058,250, a decrease of 435,500 from the previous week’s revised average. The previous week’s average was revised down by 11,500 from 17,505,250 to 17,493,750.
As you can tell the continuing claims went up slightly after continuous drops.
The pandemic also affected the GDP, which dropped by 9.5%:
Gross domestic product — the broadest measure of goods and services produced — fell 9.5 percent in the second quarter of the year, the Commerce Department said Thursday. On an annualized basis, the standard way of reporting quarterly economic data, G.D.P. fell at a rate of 32.9 percent.
The media will concentrate on the 32.9% annualized rate. Technically, it’s not misleading because it is true. The government “always ‘annualizes’ the quarterly GDP figures — meaning the number assumes the pace the economy grew or shrunk last quarter will continue over the year.”
People stopped spending:
Sharp contractions in personal consumption, exports, inventories, investment and spending by state and local governments all converged to bring down GDP, which is the combined tally of all goods and services produced during the period.
Spending slid in health care and goods such as clothing and footwear. Inventory investment drops were led by motor vehicle dealers, while equipment spending and new family housing took hits when it came to investment.
Prices for domestic purchases, a key inflation indicator, fell 1.5% for the period, compared to a 1.4% increase in the first quarter when GDP fell 5%, The personal consumption expenditures price index dropped 1.9% after rising a tepid 1.3% in Q1. Excluding food and energy, the “core” PCE prices were off 1.1%.
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