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The U.S. economy is still struggling to return to normal and faces an uncertain future.
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The U.S. economy remains in a deep ditch even after a record-shattering burst of growth during the summer.
How deep? Gross domestic product is about 3.5% smaller now than it was at its pre-coronavirus peak. That’s almost as bad as the economy got during the 2007–09 recession, one of the most severe downturns in modern times.
“To put this in context, a 3.5% decline in real GDP would still be the third worst recession in the post–World War II period,” said chief economist Gus Faucher of PNC Financial Services.
Looked at another way, some $670 billion in economic activity has vanished — the equivalent of what the U.S. is spending on the military this year.
The human cost is evident in rising business failures and the U.S.’s high unemployment rate. Nearly 11 million of the 22 million people who lost their jobs at the peak of the crisis in the early spring haven’t returned to work. And millions of self-employed workers have also been left out in the cold.
The lost economic activity — and all the jobs and businesses they represent — is not going to come back right away, either.
The record 33.1% annualized surge in gross domestic product in the third quarter is likely to slow to 3% or so in the final three months of 2020.
Growth could soften further if the latest coronavirus wave crests higher and leads to more government restrictions, especially in the absence of another major federal stimulus. Most government aid expired several months ago after Congress deadlocked on what to do next.
“The outlook [for the fourth quarter] is very shaky in our view,” said chief economist Aneta Markowska of Jefferies LLC. “The economy has already lost a lot of momentum.”
While some Wall Street economists predict U.S. growth could return to precrisis levels as early as next spring or summer, others including Markowska contend it could take longer, depending on whether a vaccine for COVID-19 is developed or Congress enacts new stimulus.
More federal aid is a virtual certainty, particularly if Democrat Joe Biden beats President Trump in the election next week. What’s far from clear is just how much Washington is willing spend.
