Current methods for collecting economic data causes a disconnect between what people are actually feeling in their lives and the numbers being released to the public. That’s why prior to this week, we knew that COVID-19 and subsequent shutdowns have made large impacts on the American economy, but we didn’t know the full scope of the damage.
On Thursday, the Bureau of Economic Analysis released its latest economic growth numbers, and they paint the picture of a crisis unlike any seen since the Great Depression. The latest Gross Domestic Product (GDP) numbers, which represent the total value of everything produced in the economy, are simply shocking. On an annualized basis, which assumes current trends continue for a year, U.S. GDP shrank by 32.9 percent. From the previous quarter, January through March of this year, the GDP decreased by $1.8 trillion, or 9.5 percent. American GDP now stands where it was at the end of 2014. That means five years of economic growth have disappeared in only the last six months.
For perspective, national GDP declined by five percent in the first quarter of this year, while Louisiana’s GDP decreased by 6.6 percent.
Many will argue the spikes in cases and shutdowns across the country throughout the months of April, May, and June make these numbers unsurprising, but that doesn’t make them any less shocking or serious. Considering the struggles Americans experience during times of slow economic growth, declining at this rate raises many new and more significant issues.
While the government stimulus and generous unemployment benefits actually raised incomes for this period, both personal spending and business investment declined tremendously. As both people and businesses face uncertainty, they are unwilling to spend or invest, leading to the massive decline in GDP for this quarter.
As for more local data, the number of Louisianans making initial unemployment claims dropped drastically, from 17,500 claims in the previous week to more than 14,500 in the latest report. This is the lowest number we’ve seen since the pandemic started. It remains uncertain whether this drastic drop is real or will be revised again next week. The number of Louisianians on unemployment insurance continues to hold steady at just over 310,000.
Among all the bad news this week, one thing is for certain. Until people and businesses feel safe enough that they can conduct business without being forced to shut their doors by the government, this trend appears poised to continue for the next three months at minimum.