- US gross domestic product fell at a 4.8% annualized rate in the first quarter, according to Commerce Department figures released Wednesday.
- The report showed that the longest-ever economic expansion that started following the Great Recession has officially ended.
- Now, economists are watching to see how bad second quarter GDP may slump as the coronavirus pandemic continues in the US.
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The longest-ever US economic expansion is officially over.
US gross domestic product fell at a 4.8% annualized rate in the first quarter, according to Commerce Department figures released Wednesday. Economists expected that GDP would shrink by a 3.8% annualized rate in the first quarter, according to Bloomberg data.
The slump from January through March reflects the sharp economic impact of country-wide shutdowns to curb the spread of Covid-19. In March, most of the US went into lockdown mode — states banned non-essential business, sent workers home, and told residents to practice social-distancing.
“Today’s first quarter numbers are just the deeply unappetizing appetizer,” wrote Ian Shepherdson, chief economist of Pantheon Macroeconomics, in a Wednesday note.
The GDP contraction has ended the longest-ever economic expansion that took place in the US after the Great Recession of 2007-2009. During the record expansion, the unemployment rate fell to a 50-year low of 3.5%, and the US economy added jobs for 113 months in a row.
Now, it’s likely that a coronavirus-induced recession started in the first quarter. A slew of economic indicators point to extreme fallout in the US economy.
In just five weeks, 26 million Americans have filed for unemployment claims, effectively erasing more than a decade of job creation in just over a month. In addition, industrial production has fallen, retail sales have declined at a record pace, and housing sales have slumped.
While some economists mark the beginning of a recession as two consecutive quarters of GDP contraction, official arbiters have a more comprehensive approach. The National Bureau of Economic Research says a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
Any official call will take some time, as the bureau’s Business Cycle Dating Committee weighs whether a recession began in March, when much of the US was shut down amid the coronavirus pandemic, or if the economy started trailing off at the end of February.
Going forward, economists will be watching to see how bad the situation becomes and weigh what shape a recovery might take. The worst may be yet to come — first quarter GDP could be revised even lower as more data is collected.