7 ms·

US economy suffers worst quarter since WWII as GDP shrinks 32.9%

62 points by LinuxBender 6y ago

sadfev 6y ago
I have to say I was wrong when I thought strict lockdown wasn’t necessary in April-June. US suffered catastrophic GDP shrinkage without even the benefit of pandemic being manageable. It would have been preferable to have a even more catastrophic Q2 and slow but steady recovery from then on. Now this constant start-stop isn’t helping the economy recover while the pandemic is still wrecking havoc! COVID-19 exposed every level of inefficiency and incompetency in governance, healthcare and public discourse in USA
- NotSammyHagar 6y ago
  Thanks for sharing a potentially embarrassing opinion. What changed in your thoughts between then and now, what convinced you to change? We can still do a couple of month shutdown and stop this thing. But there would be more political resistance than ever, because we are stupid as a collective society in america. I'd like to understand what impacted your thinking, maybe we can replicate that in explaining the situation.
  - sadfev 6y ago
    I had more faith in the medical infrastructure of the US and common sense of the populace! How wrong I was! I had no idea how woefully underprepared hospitals were for ANY kind of emergency. Who in the actual world has a coronavirus party? The lack of policing when it came to stop crowds (ironic right?), the strange refusal to wear a mask, the bizzare and blatant apathy. I could list many things but I have to say, the federal and state governments completely dropped the ball when it came to tracing and enforcing quarantine. I was reading how Sweden, Germany and South Korea handled the initial pandemic. Now even the hardest hit countries like Spain and Italy are faring very well. Sweden didn’t close the country at all and relied mostly on voluntary confinement/quarantine though the strategy has been criticized for not protecting elderly but there isn’t a total economic shutdown or untamable level of pandemic. US got the worst of both worlds mass unemployment, screeching slow economy and uncontrollable intensity of pandemic.
    - mycall 6y ago
      There is a shared blame to go around to all the science deniers, "news" organizations included.
    - salmon30salmon 6y ago
      COVID parties were mostly fabricated. Don't spread FUD. Unless we locked down until there is a vaccine cases would return.
- jacques_chester 6y ago
  I remember you arguing that case and I appreciate that you have the guts and honesty to change your mind out loud.
- salmon30salmon 6y ago
  I am sorry, but I think you overcorrected. The problem was that we locked down at all. Nearly the same mitigation could have happened with masks, distance and isolation. Yes, testing was a shitshow. But look at Spain, Australia etc. If you lock down, eventually the virus comes back. Here are literally the only options: 1. Lockdown fully and completely until there is a vaccine that's distributed 2. Lockdown hard until cases in (Region) are zero and then reopen without any outside entry to (Region) 3. Take public health measures like masking, isolation of sick, protection of weak and accept cases and deaths 4. Ignore it, accept lots of death and cases This virus will continue to spread until there is immunity, either through natural means or vaccine. Lockdowns don't stop the virus unless migration is also stopped. Period. All it takes is one person to fall through the cracks and your 6 months of lockdown are thrown out the window. There are structural problems that need to be addressed, the fact that hospitals are profit driven and operate near 100% capacity at all times. The fact that our public health departments are political by their leadership. The fact that there is zero trust of anyone anywhere. But you fix all of those and you still have a virus that will spread until immunizations levels are met. Finally, the Gulf States are having their _first wave_! They flattened the curve during the NYC outbreak. But people moved, virus spread. Lockdowns are a terrible, blunt, unsustainable, damaging, dangerous and ineffective in the long run.
Dahoon 6y ago
32%. About the percentage of effectiveness of the government's handling perhaps?
- mensetmanusman 6y ago
  Compare covid weekly deaths per 100,000 capita over time to see the effect of different government responses.
  - thephyber 6y ago
    Comparing different governments means comparing different cultures of people as well. It's not clear if comparing the same government over time is isolating government response, medical learning, environmental changes, or cultural changes among the people. America's biggest failure against COVID was to not take it seriously enough at the citizen level. The government response failed when we didn't have a quick test rolled out quickly and even after we realized that was our problem we still didn't get a same-day test rolled out at scale.
    - mensetmanusman 6y ago
      The govt. response ‘failed’ in so much as it is prescribed goals that each citizen is free to prescribe. The curve has been flattened from the peak. Without a vaccine, all models point to >50% of people getting infected. Vaccines are not for sure going to even exist. The only known short-term vaccine is surviving covid.
      - rayhendricks 6y ago
        The government response in the USA might have failed. The response by by other governments [TW/NZ/ROK/JP] are keeping the virus under control without a vaccine, and if we had a national mask mandate along with a new CCC-like program for contract tracers then we could also have much less than 50% infection. However Trump will probably be re-elected, Obamacare will be overturned with a new SCOTUS pick when RBG dies in a couple months, and corporations will get immunity to COVID lawsuits from employees. Just my prediction.
jdm2212 6y ago
It shrunk at an annualized rate of 32.9%, which means it actually shrunk about 8%. If it actually shrunk 32.9% in one quarter, we'd not only be way beyond Great Depression territory but actually into full-on collapse of society.
- detaro 6y ago
  * about 9.5%
- radford-neal 6y ago
  Right. This mis-statement is endemic in financial journalism. In ordinary circumstances quoting the change in terms of the annual rate of change is useful - provided it's correctly described as that! - but in the present circumstance it makes no sense. Nobody is expecting a new pandemic every quarter, so that the 9.5% drop this quarter will be followed by another 9.5% drop next quarter, and so on indefinitely...
  - thephyber 6y ago
    It's only a mis-statement in the headline because headlines are always edited for brevity. The first paragraph makes the specific unit of the number clear.
    - Fjolsvith 6y ago
      I'd still classify it as click bait.
- randyrand 6y ago
  That’s an odd way of looking at it. GDP does not require a annual timescale. You are free to use your own. Quarters are also common and the headline makes that clear. Plus, they can’t report on the annual GDP until the year ends, so even that 8% figure might not be accurate!
  - maxerickson 6y ago
detaro 6y ago
duplicate: https://news.ycombinator.com/item?id=23997362 https://news.ycombinator.com/item?id=23997362
Synaesthesia 6y ago
It’s a worse recession than the Great Depression or any war AFAIK.
mensetmanusman 6y ago
For those curious, that is a loss of about $10,000,000 per covid death.
- posix_compliant 6y ago
  So far.
- lippel82 6y ago
  From an economists point of view, the thing to compare to would be cost per prevented death. I don't have a current estimate for that, but it is presumably much lower.
  - mensetmanusman 6y ago
    They are both interesting numbers. Prevented death is interesting, since we had a huge shutdown with the same outcome as Sweden, hah
    - maxerickson 6y ago
      Sweden is also having a big recession. Economies are in poor shape anywhere the virus is prevalent, it isn't just government policy that is impacting the economy.
      - mensetmanusman 6y ago
        If the US has a recession, Sweden will too...
- mycall 6y ago
  Funny as I have heard from various places that $10M is what an average life is worth [1]. [1] https://www.npr.org/2020/04/23/843310123/how-government-agencies-determine-the-dollar-value-of-human-life https://www.npr.org/2020/04/23/843310123/how-government-agen...
  - 6y ago
anm89 6y ago
Its crazy to me that gdp only shrunk by 9 percent for the quarter. Thinking of the fuel that wasn't used, the entertainment services that weren't consumed, the non essential shopping that wasn't done and then all of the side effects like reduced financial transactions on the other things that didnt happen, it's crazy to me that that wasn't more than that. Thinking through this does help me to see why you have to annualize if you aren't doing a quarter to quarter comparison.
- lippel82 6y ago
  No, wait, compared quarter to quarter it really did decrease by 32.9%. The 9.5% is what would be missing if suddenly everything went back to normal. Which it won't.
  - nkurz 6y ago
    I don't think that's true. Or maybe I misunderstand you? The US GDP in constant dollars [1] went from $19.0 Trillion in 2020Q1 to $17.2 Trillion in 2020Q2. The number for 2019Q2 was also $19.0 Trillion. Isn't this a 9.5% decrease from both the previous quarter, and the same quarter in the previous year? Is there a way in which this read as a real 32.9% decrease? [1] https://tradingeconomics.com/united-states/gdp-constant-prices https://tradingeconomics.com/united-states/gdp-constant-pric...
- solotronics 6y ago
  I wonder if it's just a matter of creative accounting? Whole sectors of the economy such as travel, dining out, entertainment disappeared for a period.

62 points by LinuxBender 6y ago

I have to say I was wrong when I thought strict lockdown wasn’t necessary in April-June. US suffered catastrophic GDP shrinkage without even the benefit of pandemic being manageable. It would have been preferable to have a even more catastrophic Q2 and slow but steady recovery from then on. Now this constant start-stop isn’t helping the economy recover while the pandemic is still wrecking havoc! COVID-19 exposed every level of inefficiency and incompetency in governance, healthcare and public discourse in USA

NotSammyHagar 6y ago
Thanks for sharing a potentially embarrassing opinion. What changed in your thoughts between then and now, what convinced you to change? We can still do a couple of month shutdown and stop this thing. But there would be more political resistance than ever, because we are stupid as a collective society in america. I'd like to understand what impacted your thinking, maybe we can replicate that in explaining the situation.
- sadfev 6y ago
  I had more faith in the medical infrastructure of the US and common sense of the populace! How wrong I was! I had no idea how woefully underprepared hospitals were for ANY kind of emergency. Who in the actual world has a coronavirus party? The lack of policing when it came to stop crowds (ironic right?), the strange refusal to wear a mask, the bizzare and blatant apathy. I could list many things but I have to say, the federal and state governments completely dropped the ball when it came to tracing and enforcing quarantine. I was reading how Sweden, Germany and South Korea handled the initial pandemic. Now even the hardest hit countries like Spain and Italy are faring very well. Sweden didn’t close the country at all and relied mostly on voluntary confinement/quarantine though the strategy has been criticized for not protecting elderly but there isn’t a total economic shutdown or untamable level of pandemic. US got the worst of both worlds mass unemployment, screeching slow economy and uncontrollable intensity of pandemic.
  - mycall 6y ago
    There is a shared blame to go around to all the science deniers, "news" organizations included.
  - salmon30salmon 6y ago
    COVID parties were mostly fabricated. Don't spread FUD. Unless we locked down until there is a vaccine cases would return.
jacques_chester 6y ago
I remember you arguing that case and I appreciate that you have the guts and honesty to change your mind out loud.
salmon30salmon 6y ago
I am sorry, but I think you overcorrected. The problem was that we locked down at all. Nearly the same mitigation could have happened with masks, distance and isolation. Yes, testing was a shitshow. But look at Spain, Australia etc. If you lock down, eventually the virus comes back. Here are literally the only options: 1. Lockdown fully and completely until there is a vaccine that's distributed 2. Lockdown hard until cases in (Region) are zero and then reopen without any outside entry to (Region) 3. Take public health measures like masking, isolation of sick, protection of weak and accept cases and deaths 4. Ignore it, accept lots of death and cases This virus will continue to spread until there is immunity, either through natural means or vaccine. Lockdowns don't stop the virus unless migration is also stopped. Period. All it takes is one person to fall through the cracks and your 6 months of lockdown are thrown out the window. There are structural problems that need to be addressed, the fact that hospitals are profit driven and operate near 100% capacity at all times. The fact that our public health departments are political by their leadership. The fact that there is zero trust of anyone anywhere. But you fix all of those and you still have a virus that will spread until immunizations levels are met. Finally, the Gulf States are having their _first wave_! They flattened the curve during the NYC outbreak. But people moved, virus spread. Lockdowns are a terrible, blunt, unsustainable, damaging, dangerous and ineffective in the long run.

Dahoon 6y ago

32%. About the percentage of effectiveness of the government's handling perhaps?

mensetmanusman 6y ago
Compare covid weekly deaths per 100,000 capita over time to see the effect of different government responses.
- thephyber 6y ago
  Comparing different governments means comparing different cultures of people as well. It's not clear if comparing the same government over time is isolating government response, medical learning, environmental changes, or cultural changes among the people. America's biggest failure against COVID was to not take it seriously enough at the citizen level. The government response failed when we didn't have a quick test rolled out quickly and even after we realized that was our problem we still didn't get a same-day test rolled out at scale.
  - mensetmanusman 6y ago
    The govt. response ‘failed’ in so much as it is prescribed goals that each citizen is free to prescribe. The curve has been flattened from the peak. Without a vaccine, all models point to >50% of people getting infected. Vaccines are not for sure going to even exist. The only known short-term vaccine is surviving covid.
    - rayhendricks 6y ago
      The government response in the USA might have failed. The response by by other governments [TW/NZ/ROK/JP] are keeping the virus under control without a vaccine, and if we had a national mask mandate along with a new CCC-like program for contract tracers then we could also have much less than 50% infection. However Trump will probably be re-elected, Obamacare will be overturned with a new SCOTUS pick when RBG dies in a couple months, and corporations will get immunity to COVID lawsuits from employees. Just my prediction.

jdm2212 6y ago

It shrunk at an annualized rate of 32.9%, which means it actually shrunk about 8%. If it actually shrunk 32.9% in one quarter, we'd not only be way beyond Great Depression territory but actually into full-on collapse of society.

detaro 6y ago
* about 9.5%
radford-neal 6y ago
Right. This mis-statement is endemic in financial journalism. In ordinary circumstances quoting the change in terms of the annual rate of change is useful - provided it's correctly described as that! - but in the present circumstance it makes no sense. Nobody is expecting a new pandemic every quarter, so that the 9.5% drop this quarter will be followed by another 9.5% drop next quarter, and so on indefinitely...
- thephyber 6y ago
  It's only a mis-statement in the headline because headlines are always edited for brevity. The first paragraph makes the specific unit of the number clear.
  - Fjolsvith 6y ago
    I'd still classify it as click bait.
randyrand 6y ago
That’s an odd way of looking at it. GDP does not require a annual timescale. You are free to use your own. Quarters are also common and the headline makes that clear. Plus, they can’t report on the annual GDP until the year ends, so even that 8% figure might not be accurate!
- maxerickson 6y ago

detaro 6y ago

duplicate: https://news.ycombinator.com/item?id=23997362 https://news.ycombinator.com/item?id=23997362

Synaesthesia 6y ago

It’s a worse recession than the Great Depression or any war AFAIK.

mensetmanusman 6y ago

For those curious, that is a loss of about $10,000,000 per covid death.

posix_compliant 6y ago
So far.
lippel82 6y ago
From an economists point of view, the thing to compare to would be cost per prevented death. I don't have a current estimate for that, but it is presumably much lower.
- mensetmanusman 6y ago
  They are both interesting numbers. Prevented death is interesting, since we had a huge shutdown with the same outcome as Sweden, hah
  - maxerickson 6y ago
    Sweden is also having a big recession. Economies are in poor shape anywhere the virus is prevalent, it isn't just government policy that is impacting the economy.
    - mensetmanusman 6y ago
      If the US has a recession, Sweden will too...
mycall 6y ago
Funny as I have heard from various places that $10M is what an average life is worth [1]. [1] https://www.npr.org/2020/04/23/843310123/how-government-agencies-determine-the-dollar-value-of-human-life https://www.npr.org/2020/04/23/843310123/how-government-agen...
- 6y ago

anm89 6y ago

Its crazy to me that gdp only shrunk by 9 percent for the quarter. Thinking of the fuel that wasn't used, the entertainment services that weren't consumed, the non essential shopping that wasn't done and then all of the side effects like reduced financial transactions on the other things that didnt happen, it's crazy to me that that wasn't more than that. Thinking through this does help me to see why you have to annualize if you aren't doing a quarter to quarter comparison.

lippel82 6y ago
No, wait, compared quarter to quarter it really did decrease by 32.9%. The 9.5% is what would be missing if suddenly everything went back to normal. Which it won't.
- nkurz 6y ago
  I don't think that's true. Or maybe I misunderstand you? The US GDP in constant dollars [1] went from $19.0 Trillion in 2020Q1 to $17.2 Trillion in 2020Q2. The number for 2019Q2 was also $19.0 Trillion. Isn't this a 9.5% decrease from both the previous quarter, and the same quarter in the previous year? Is there a way in which this read as a real 32.9% decrease? [1] https://tradingeconomics.com/united-states/gdp-constant-prices https://tradingeconomics.com/united-states/gdp-constant-pric...
solotronics 6y ago
I wonder if it's just a matter of creative accounting? Whole sectors of the economy such as travel, dining out, entertainment disappeared for a period.