We’re starting to get a picture of just how much damage the pandemic is doing to the economy. The Commerce Department reported Wednesday that gross domestic product — the total of all the goods and services this economy produces — fell 4.8% in the first quarter.
Household spending was down about 7.5%. Purchases of services fell more than 10%. And durable goods purchases — cars and appliances and stuff — dropped by more than 16%. Businesses weren’t buying either — equipment spending fell more than 15%. And this is only the beginning.
The economy was cranking along in January and February. Then, in early March, we started to hear warnings about the need for COVID-19 social distancing and statewide lockdowns.
Initially, that sent consumers out shopping to stock up — including at Tom Butcher’s music shop in Seattle.
“They really wanted to get some musical instruments and toys maybe to occupy themselves,” Butcher said. But by the middle of March, his store was shut down. “Most of our business just disappeared.”
Multiply that by tens of millions of businesses across the country, and the economy “just fell off a cliff, and we went from everything being open to everything closed,” said Paul Ashworth, chief North American economist at Capital Economics.
It’s not just stores and restaurants and the like. Spending on health care is down too, according to Betsey Stevenson, professor of public policy and economics at the University of Michigan.
“To make room for COVID patients, hospitals really had to shut down a lot of nonessential treatment,” Stevenson said.
Now, keep in mind, all of these declines happened in the last three weeks of the quarter. The economic shutdown really took hold in April.
“The decline in the second quarter is much bigger than the first quarter. We’re thinking it’s somewhere around 40%,” Ashworth said.
On the plus side, Ashworth notes some states are reopening, people are getting stimulus checks and unemployment and small-business loans. But, that prediction of a 40% decline in GDP this quarter already includes all that stimulus money flowing in.
COVID-19 Economy FAQs
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.
Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.
Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.