The US economy contracted at its steepest pace since the Great Depression in the second quarter as the Covid-19 pandemic shattered consumer and business spending.
A budding recovery in the US is now under threat from a resurgence in new cases of coronavirus.
US gross domestic product collapsed at a 32.9% annualised rate last quarter, the deepest decline in output since the government started keeping records in 1947, the Commerce Department said today.
The drop in GDP was more than triple the previous all-time decline of 10% in the second quarter of 1958. The economy contracted at a 5% pace in the first quarter.
Economists polled by Reuters had forecast GDP plunging at a 34.1% rate in the three months from April to June.
The bulk of the historic tumble in GDP occurred in April when activity almost ground to an abrupt halt after restaurants, bars and factories among others were closed in mid-March to slow the spread of the coronavirus.
Though activity picked up starting in May, momentum has slowed amid a resurgence in new cases of the illness, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again or pausing reopenings.
That has tempered hopes of a sharp rebound in growth in the third quarter.
Federal Reserve Chair Jerome Powell last night acknowledged the slowdown in activity. The Fed kept interest rates near zero and pledged to continue pumping money into the economy.
Analysts said that the bottom fell out of the economy in the second quarter, adding that the outlook is not very good.
They said that Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction.
The plunge in GDP and faltering recovery could put pressure on the White House and Congress to agree on a second stimulus package.
President Donald Trump, whose opinion poll numbers have tanked as he struggles to manage the pandemic, economic crisis and protests over racial injustice three months before the November. 3 election, said this week he was in no hurry.
Economists say without the historic fiscal package of nearly $3 trillion, the economic contraction would have been deeper.
The package offered companies help paying wages and gave millions of unemployed Americans a weekly $600 supplement, which expires on Saturday. Many companies have exhausted their loans.
This, together with the sky-rocketing coronavirus infections is keeping layoffs elevated.
Meanwhile, the US saw its second consecutive weekly increase in new claims for unemployment benefits, the Labor Department said today, with a total of 1.43 million claims filed.
The data for the week ended July 25 marked an increase of 12,000 from the previous week's upwardly revised level, while the insured unemployment rate rose to 11.6% in the week ended July 18.
The increase follows a surge in Covid-19 cases that has prompted renewed lockdown measures.
The US has seen surging weekly claims for unemployment benefits since business began locking down in mid-March to stop the spread of the coronavirus.
They peaked later that month, then began declining, before beginning their incremental climb again earlier in July at levels far higher than any seen in the worst week of the global financial crisis 12 years ago.
The latest data were worse than expected and do not include the 829,697 new claims by people who filed under a programme for those who would not normally be eligible for aid.
Even as the insured unemployment rate ticked upwards, the four-week moving average in the week ended July 18 declined 17.1 million - indicating some rehiring was occurring.
The total number of people receiving benefits under all programmes as of the week ended July 11 was 30.2 million, about 1.6 million less than the previous week.