Coronavirus Recession Takes Hold of US, France, and Spain

Marco Green
August 2, 2020

The previous worst quarterly contraction - 10 percent drop - occurred in 1958 during the Eisenhower administration. It came after a 5.2 per cent drop in the first quarter, dragging Spain into its steepest recession ever, at a record pace.

"And the recent rise in virus cases is likely to hold back the recovery in tourism, strengthening our view that the Spanish economy will struggle to rebound as quickly as its neighbours". The government's estimate of the second-quarter fall in the gross domestic product has no comparison since records began in 1947.

But one person who doesn't have time to wait is President Donald Trump, whose odds of reelection are likely plummeting right alongside the USA economy as November draws near. The dates of presidential elections are enshrined in federal law and would require an act of Congress to change.

In the first quarter of 2020, US GDP fell at an annual rate of 4.8%, according to the Bureau of Economic Analysis, already a significant drop from the 2.1% increase seen in Q4 2019.

"The decline in second quarter GDP reflected the response to COVID-19, as "stay-at-home" orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses", the department said, adding, "This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending".

The US contraction was driven by a deep decline in consumer spending, which accounts for about 70 percent of economic activity.

"The latest jobless claims data show that the resurgence in Covid-19 cases is taking a toll on the recovery in the labor market", Oxford Economics lead USA economist Nancy Vanden Houten said in an analysis. The figure is still more optimistic than was initially expected by economists, who predicted a 34.7% decline, according to surveys conducted by Dow Jones.

More businesses have had to shut down again as virus cases rise, undermining the nascent United States recovery. Between June 21 and July 19, for example, the proportion of Texas bars that were closed shot from 25% to 73%.

Many states have imposed restrictions on visitors from the states that have reported high levels of cases, hurting many industries. But many job losses will wind up being permanent despite the stimulus. In a sign of how weakened the job market remains, more than 1.4 million laid-off Americans applied for unemployment benefits last week.

Adding to the economic gloom was a disappointing jobless claims report, also released Thursday, which showed that initial weekly unemployment filings rose for the second straight week after steadily falling from its March peak of nearly 7 million.

Other reports by Click Lancashire

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