Samuel Case, FISM News
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The U.S. economy grew at a historic pace in the third quarter as the government injected more than $3 trillion worth of pandemic relief, which fueled consumer spending. The Commerce Department reported a 33.1% annualized growth rate. The economy remains 3.5% below its level at the end of 2019, and incomes plunged in the third quarter.
President Trump praised the report. “Biggest and Best in the History of our Country, and not even close,” Trump wrote on Twitter. “So glad this great GDP number came out before November 3rd.”
Joe Biden highlighted the lack of full recovery. “We are in a deep hole, and President Trump’s failure to act has meant that third-quarter growth wasn’t nearly enough to get us out of (it),” said Biden.
The rebound in gross domestic product followed a 31.4% contraction rate in the second quarter, the deepest since the government started keeping records in 1947. On a year-on-year basis, GDP jumped 7.4% last quarter after sinking 9.0% in the April-June period. The rebound reversed about two-thirds of the 10.1% drop in GDP in the first half. By comparison, the economy contracted 4% from peak to trough during the 2007-09 Great Recession.
The government’s rescue package provided a lifeline for many businesses and the unemployed, juicing up consumer spending, which on its own, contributed 76.3% to the surge in GDP. But government funding has been depleted with no deal in sight for another round of relief.
Foreshadowing a slowdown in consumer spending, personal income tumbled at a $540.6 billion rate in the third quarter after surging at a $1.45 trillion pace in the prior period. The drop was attributed to a decline in government transfers related to the pandemic relief programs.
A separate report from the Labor Department showed initial claims for state unemployment benefits fell 40,000 to a seasonally adjusted 751,000 in the week ending Oct. 24. Including a government-funded program, 1.1 million people sought unemployment benefits last week.
Though claims have dropped from a record 6.867 million in March, they remain above their 665,000 peaks seen during the 2007-09 Great Recession. About 22.7 million Americans were receiving unemployment benefits in early October, though many have exhausted their state aid eligibility.
Just over half of the 22.2 million jobs lost during the pandemic have been recouped.
Reuters American Wire, edited for brevity