Second Quarter GDP dropped 32.9% due to shutdowns

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The U.S. economy saw the biggest quarterly plunge in activity ever, though the plummet in the second quarter wasn’t as bad as feared.

Gross domestic product from April to June plunged 32.9% on an annualized basis, according to the Commerce Department’s first reading on the data released Thursday. Economists surveyed by Dow Jones had been looking for a drop of 34.7%.

Still, it was the worst drop ever, with the closest previously coming in mid-1921. This was even worse than any of the GDP declines of the Great Recession and the Great Depression.

 Neither the Great Depression nor the Great Recession nor any of the more than three dozen economic slumps over the past two centuries have ever caused such a sharp drain over so short a period of time.

By comparison, the worst quarter during the financial crisis of 2008 was the 8.4% GDP drop in the fourth quarter of that year. The previous low-water mark was a 10% slide in the first quarter of 1958, while the worst in recorded history came in Q2 of 1921.

This particular tumble in activity owes to a different source than any of its predecessors: a government-induced shutdown aimed at combating a pandemic.

Workers across the country were told to stay home from any job not considered essential, resulting in a crushing halt that saw the unemployment rate peak at 14.7%, a post-Depression high. The National Bureau of Economic Research said the current recession actually started in February, a month before the pandemic declaration. Q1 GDP fell 5%.

Although unemployment is improving as only 1.4 million have filed unemployment claims, the GDP is still decreasing as consumer confidence is falling as we speak. 

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