U.S. gross domestic product contracted at a 4.8 percent annual rate in the first quarter of 2020, the Commerce Department said Wednesday, marking the first decline since 2014, and the worst quarterly contraction since economic output shrunk 8.4 percent in 2008.
Consumer spending fell at a seasonally-adjusted annual rate of 7.6 percent — its largest decline since the second quarter of 1980 — while health-care spending also notably declined 2.3 percent despite the ongoing coronavirus pandemic, as many hospitals and practices have been forced to fire or furlough workers due to prospective patients canceling or being prohibited from undergoing elective procedures.
This is stunning: Nearly half of the Q1 decline in GDP can be attributed to healthcare, which is presumably delaying of elective procedures.
It's a strange reality that in the midst of a pandemic, we have a healthcare-led recession. pic.twitter.com/G3IezQkEzX
— Justin Wolfers (@JustinWolfers) April 29, 2020
Businesses investment also receded, with building expenditures shrinking nearly 10 percent and investment in equipment down 15 percent, while exports dropped 8.7 percent and imports fell by 15.3 percent. The rate of inflation remained low and relatively unchanged at 1.3 percent.
One of the few surges was the housing market, where low mortgage rates helped raise investment by 21 percent. But economists have warned the second quarter could be five to ten times worse for the country, before rebounding later this summer.
“You’re looking at something like minus 20 percent to minus 30 percent in the second quarter,” White House economic adviser Kevin Hassett told CNBC on Monday, calling the pandemic “the biggest shock since the Great Depression. It’s a very grave shock and it’s something we need to take seriously.”
“You’re going to see the economy really bounce back in July, August, September,” Treasury Secretary Steven Mnuchin told Fox News this week. “You’re seeing trillions of dollars that’s making its way into the economy and I think this is going to have a significant impact.”
Last week, the Labor Department reported that over four million Americans had filed for unemployment from April 12-18, bringing the total number of jobless Americans amid coronavirus to 26.5 million, approximately 16 percent of the country’s labor force.