Economic output fell at its fastest pace on record last spring as the coronavirus pandemic forced businesses across the United States to close their doors and kept millions of Americans shut in their homes for weeks.
Gross domestic product — the broadest measure of goods and services produced — fell 9.5 percent in the second quarter of the year, the Commerce Department said Thursday. On an annualized basis, the standard way of reporting quarterly economic data, G.D.P. fell at a rate of 32.9 percent.
The collapse was unprecedented in its speed and breathtaking in its severity. The only possible comparisons in modern American history came during the Great Depression and the demobilization after World War II, both of which occurred before the advent of modern economic statistics.
Unlike past recessions, this one was a result of a conscious decision to suspend economic activity to slow the spread of the virus. Congress pumped trillions of dollars into the economy to sustain households and businesses, limit long-term damage and allow for a rapid rebound.
The plan worked at first. In recent weeks, however, cases have surged in much of the country. Data from public and private sources indicate a pullback in economic activity, reflecting consumer unease and renewed shutdowns.
“In another world, a sharp drop in activity would have been just a good, necessary blip while we addressed the virus,” said Heather Boushey, president of the Washington Center for Equitable Growth, a progressive think tank. “From where we sit in July, we know that this wasn’t just a short-term blip.”
The number of Americans filing new claims for state unemployment benefits totaled 1.43 million last week, the Labor Department reported Thursday.
It was the 19th straight week that the tally exceeded one million, an unheard-of figure before the coronavirus pandemic. And it was the second weekly increase in a row after nearly four months of declines, a sign of how the rebound in cases has undercut the economy’s nascent recovery. Claims for the previous week totaled 1.42 million.
New claims for Pandemic Unemployment Assistance, the government’s program aimed at covering freelancers, the self-employed and other workers not covered by traditional unemployment benefits, totaled 830,000. That number, unlike the figure for state claims, is not seasonally adjusted.
“We’re still in a desperate situation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago. Noting that weekly claims were in the 200,000 range before the pandemic brought widespread shutdowns in March, she added, “This is unique in terms of the speed and magnitude of the job losses.”
What’s more, fears are growing that after rebounding strongly in May and June, the economy has run out of steam, with many states reversing the reopening of businesses.
At the same time, the $600 supplemental weekly unemployment payment from the federal government is ending, a potentially crippling financial blow to millions.
“Everyone wants to keep putting on rose-colored glasses, but it’s blinding us to the reality of the situation and what we have to deal with,” Ms. Swonk said.
The German economy shrank 10.1 percent from April through June compared to the previous quarter, the biggest decline since the government starting keeping the data in 1970.
But the figure, which covers the peak period of pandemic lockdowns, may already be old news. Surveys of business managers indicate that Germany’s largest economy is rebounding quickly, though it will probably be months or years before growth returns to normal, and the risk of further setbacks is high.
The German labor market stabilized in July, according to data published Thursday by the nation’s labor office. The number of unemployed people fell by 18,000 after rising sharply from April through June. But joblessness could rise later in the year if many businesses founder, and workers who are now on furlough become unemployed.
Germany is in a better position than other European Union countries like Italy or Spain, in part because the government was effective in containing the spread. At the same time, new infections of the coronavirus are rising again as Germans return from holidays abroad, and there is fear of a second wave.
The pandemic has left deep scars on the German economy even if the pain is less severe than in many other countries, including the United States.
About 7 million people in Germany are on government-subsidized paid furloughs, and not all will get their jobs back. Companies like the automaker Daimler and Deutsche Bank are cutting their workforces permanently in response to changes in their industries that go beyond the pandemic.
Global stock markets declined on Thursday, a day after the U.S. Federal Reserve chief gave a sobering prediction of a long road ahead for economic recovery, and as investors awaited some potentially grim data on U.S. business activity and unemployment.
European markets were about 2 percent lower in late morning trading, after a mostly downbeat day for Asian stocks. Futures on Wall Street predicted to fall of about 1 percent when trading starts later in the day.
Elsewhere, the price of U.S. 10 year Treasury notes were rising, a sign of higher demand for safe investments, and oil futures dropped by about 1.5 percent. Gold slipped further from a record reached earlier in the week.
Two fresh readings on the state of the U.S. economy will be released on Thursday: the initial estimate of economic growth in the 2nd quarter, and the latest tally of first-time claims for unemployment insurance. The figure on gross domestic product, which will cover the April-June period when most of the nation was under lockdown, is expected to show a historic contraction in economic activity. On the jobs side, the number of unemployment claims is expected be about 1.4 million, about the same as the week before, but still a number that would be alarmingly high in any normal time.
Earlier Thursday, data from Germany showed that Europe’s largest economy shrank 10.1 percent from April through June compared to the previous quarter, the biggest decline since the government starting keeping the data in 1970.
The data will come a day after Jerome H. Powell, the Fed chair, told reporters that the “pace of recovery looks like it has slowed,” pointing to debit and credit card spending and hiring trends. He added, “The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in keeping the virus in check.”
Stock prices on Wall Street rose after his comments, as investors seemed heartened by the Fed’s commitment to keep looking for ways to bolster the economy.
Strong sales in China helped Huawei edge out Samsung to become the world’s biggest smartphone vendor in the second quarter, according to the research firm Canalys — a milestone for the embattled Chinese tech giant.
Distrust of Huawei’s products is rising all around the world. The Trump administration, concerned that the Chinese government might use Huawei gear to disrupt telecommunications networks, has restricted the company’s access to American technology.
And Britain this month said it would bar Huawei equipment from the country’s 5G mobile networks. Other governments have mulled similar moves.
Huawei has doubled down on the Chinese market in response, a strategy that has paid off during the pandemic. China’s economy is recovering more quickly than others, helping Huawei sell 55.8 million handsets between April and June, according to Canalys. Samsung sold 53.7 million devices.
Samsung has for years been the world’s largest smartphone seller. But its major markets, including the United States, Europe and Brazil, are deeper in the coronavirus-related economic doldrums.
“This is a remarkable result that few people would have predicted a year ago,” said Ben Stanton, a Canalys analyst. “If it wasn’t for Covid-19, it wouldn’t have happened.”
PARIS — French carmaker Renault posted a record net loss Thursday of 7.3 billion euros ($8.58 billion) in the first half of the year, as layoffs mounted at its global operations amid rising economic hardship from the coronavirus pandemic.
The bulk of Renault’s losses came from Nissan, Renault’s partner in a global automaking alliance, which this week warned it was facing its weakest sales in a decade and operating losses for the year of over $4 billion. Without Nissan’s negative contribution to the alliance, Renault’s losses were at €2 billion, down from €1.5 billion a year ago.
Global carmakers have been slammed by the pandemic, and Renault is among many looking to streamline operations to adjust to the economic downturn.
In the European Union, Renault’s most important market, its sales plunged 80 percent in April amid nationwide quarantines. The company has taken a €5 billion financial aid package from the French government, and announced plans to pull out of China and curb global production sharply to face what it called a “major crisis facing the automotive industry.”
Despite the government support, Renault said in May that it would cut nearly 15,000 jobs worldwide, or about 8 percent of its work force.
Its partner Nissan is also moving to close factories in Indonesia and Spain and to cut its global workforce and auto production
The pain is already mounting in countries where Renault operates: Around 7,000 Brazilian autoworkers went on strike earlier this week after Renault announced it would fire 747 people at its plant São José dos Pinhais in the southern state of Paraná, following the termination of 300 temporary workers.
Jeff Bezos of Amazon, Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google were called to testify before Congress on Wednesday against claims that their companies have grown too powerful.
Democrats on the committee quickly dug into the issue of competition, citing documents obtained from inside the tech companies that they said showed their anti-competitive conduct.
Republicans asked about the tech giants’ efforts in China and about unproven claims that the companies suppress conservative views.
Mr. Pichai was a consistent target of aggressive questions about Google’s search engine and the company’s decision to withdraw from a Pentagon project after employee protests about the work.
Lawmakers released documents they said showed the desire of Mr. Zuckerberg to buy the photo-sharing app Instagram as a way of quashing a competitive threat. The social network bought Instagram in 2012 for about $1 billion in cash and stock.
Mr. Cook was needled on why Apple removed parental-control apps from the App Store shortly after Apple introduced its own competing tool in 2018, and was called to defend Apple’s recent demands to collect a commission from Airbnb and ClassPass after the companies shifted to selling virtual classes because of the pandemic.
Facing Congress for the first time, Mr. Bezos had to respond to whether Amazon harms the many third-party sellers whose products make up about 60 percent of its sales.
A mixed bag of earnings from big European companies reporting on Thursday: Airbus reported a big loss for the first half and vowed to conserve cash; AstraZeneca reported a 26 percent rise in earnings for its first half as sales of new drugs beat forecasts; Credit Suisse beat expectations, thanks to a surge in trading revenue; trading also aided Shell, which reported a smaller-than-expected loss, and Total, which disclosed a surprise profit; and Nestlé announced an 18 percent rise in first-half profit but warned of slowing growth for the rest of the year.
Volkswagen said on Thursday it fell into the red during the first six months of 2020 after sales plunged 23 percent compared to a year earlier. But the world’s largest carmaker said vehicle sales, which were down by more than half in May, have begun to recover.
Yum Brands reported on Thursday that its same-store sales in the second quarter fell about 12 percent from a year ago. The company, which runs the Pizza Hut and KFC fast food chains, said nearly all of its restaurants around the world are at least partially open and sales in June had leveled off. Same-store sales in June were nearly unchanged from a year ago.
Dunkin’ Brands said it expects to close about 800 U.S. locations of its Dunkin’ chain in 2020, or about 8 percent of its total footprint. The company, which also owns Baskin-Robbins, said on Thursday that its revenue declined 20 percent in the three months through June, from a year ago.
Gap Inc., the retailer that oversees its namesake chain, Old Navy and Banana Republic, has been facing a wave of lawsuits from major mall owners and smaller landlords after it stopped paying tens of millions of dollars in rent for its roughly 2,800 stores in North America. Now, the company is filing its own lawsuits and counterclaims, saying that it is actually owed money for rent it paid in March and that leases must be renegotiated or terminated based on unexpected closures and major shifts in the shopping landscape.
Boeing said on Wednesday that it was slowing plane production and might cut jobs as it reels from the grounding of the 737 Max and a devastating aviation slowdown brought on by the coronavirus pandemic. The company also reported a $2.4 billion loss in the second quarter.
General Motors reported on Wednesday that it lost $758 million as its second-quarter revenue was more than halved, to $16.8 billion compared with $36.1 billion in the same period a year ago, as the coronavirus pandemic took a heavy toll on its operations in most regions of the world.
The way the numbers are presented may sow confusion when the Commerce Department on Thursday morning releases its preliminary estimate of second-quarter gross domestic product. Ben Casselman explains how to understand the number:
Forecasters expect the report to show that G.D.P. fell at an annual rate of about 35 percent in the second quarter. If you don’t follow economic data closely (or maybe even if you do), you might have read that as saying output fell by more than a third in just three months. But that would be wrong.
In the United States, G.D.P. isn’t reported as a simple change from one quarter to the next. It’s reported as an annual rate. (Technically a seasonally adjusted annual rate.) Think of it this way: If this rate of change held steady, this is how much G.D.P. would grow or shrink over a full year.
A negative 35 percent annual growth rate would mean economic output was 10.2 percent smaller in the second quarter than in the first. (It’s not as simple as dividing the annual rate by four, because growth rates compound.)
Looking at things on an annualized basis can be useful, because it makes it easy to compare data collected over different time periods. You’ve probably done a version of this calculation yourself! “OK, if I cut out my $4 daily latte, that would save me $1,000 a year.”
Right now, the economy is experiencing a lot of short-term swings. The developments are real and important — but it doesn’t make much sense to annualize them.
For that reason, in our coverage tomorrow, The Times plans to emphasize the simple, nonannualized change from the first quarter to the second. We’ll still give the annualized number for those used to seeing it that way, plus other numbers as relevant, such as year-over-year change.
This approach will make the second quarter change look milder than if we had used the annualized figure. We plan to do the same thing next quarter, when it will (presumably) make the rebound look smaller. But in both cases, we believe it will more clearly communicate what is happening in the economy.
Comcast, the largest cable operator in the U.S., reported on Thursday $23.7 billion in revenue and $7.9 billion in adjusted profit for the second quarter, beating expectations. Here are the highlights:
Peacock, its new streaming product, attracted 10 million sign-ups in its first three months. It differs from other platforms like HBO Max (which netted 4.1 million in one month) and Netflix in that it is free and relies on advertising for revenue. (There is a paid tier that features more content but still includes ads.) The strategy is reminiscent of the original broadcast system, which is also free. Comcast hopes to have 35 million users by 2024.
With most of the country under lockdown, Comcast added 323,000 more broadband customers, but it lost 477,000 pay TV subscribers. People switched to cheaper streaming alternatives as wallets tightened under the pandemic. It’s not a bad trade for Comcast, since a broadband subscriber tends to add more profit than a video one.
At NBCUniversal, the lack of sports and the shutdown of movie theaters and theme parks hurt the division. Sales fell 25 percent to $6.1 billion. Theme parks took a $399 million loss for the quarter, and the Universal Studios division saw sales decline nearly a fifth to $1.2 billion.
But a significant deal was struck this week between Universal and AMC Entertainment, the nation’s largest theater chain, that could recast the economics of the film industry. The studio can now sell movies on streaming 17 days after it runs in theaters, collapsing the usual 90-day window. Movies tend to make most of its box office dollars in the first two weekends, so the new terms appear to benefit the studio. In other words, there will be more reasons to stay home.
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