Sunday, September 27, 2020

Historic economic slowdown and recession in the United States

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Bad news continues for the US economy, which has now officially entered recession. The announcement, Thursday, July 30, of a contraction of 32.9% of gross domestic product (GDP) at an annualized rate in the second quarter, confirms a historic slowdown in economic activity due to the health crisis. The International Monetary Fund was counting on a contraction of 37%. Between April and June, the decrease reached 9.5% compared to the same period in 2019, a record of unprecedented magnitude since 1947, the date of the first statistics. It follows the already strong 5% drop in the first quarter.

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The weekly unemployment figures, up for the second week in a row, add to the gloomy outlook for the summer, marked in the United States by a resurgence of the pandemic caused by Covid-19. As of Thursday, 1.43 million more people registered as unemployed. This figure, up 12,000 people in eight days, confirms the trend of the previous week, which for the first time since May, recorded a slowdown in the creation of new jobs.

Premature announcements

According to official statistics, 51.1% of households had recorded a drop in income as of July 21, against 48.3% a month earlier. These data break with the encouraging outlook for June, when the reopening of shops and businesses, sometimes too quickly, had made it possible to recreate a third of the jobs lost during the containment measures.

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The new statistics also contradict the premature announcements of the Trump administration, which has been emphasizing signs of a recovery in the US economy since May. The rebound that began was slowed by an upsurge in Covid-19 cases across the country in southern and western states, including the powerful California. Several dozen of them were forced to reintroduce restrictions on commercial and leisure activities.

“Controlling the virus is a sine qua non for a real recovery” Jerome Powell, Chairman of the US Federal Reserve

In the second quarter, most sectors of activity were affected: sales in clothing, transport, hotels, health and catering fell. Companies were also penalized by the slowdown in international trade: exports plunged 64.1%. And, in the absence of notable progress in containing the disease, the third trimester could prove to be just as catastrophic.

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