US suffers worst economic decline on record in second quarter as GDP contracts by 32.9%

Nation's economy suffers historic financial decline as coronavirus pandemic continues to ravage many states

The United States has suffered its worst economic decline on record with the nation’s gross domestic product (GDP) contracting by 32.9 percent in the second quarter, as the coronavirus pandemic continued to cause one of the largest financial crises in history.

The Commerce Department's estimate of the second-quarter decline in GDP, the total output of goods and services, marked the sharpest such drop on records dating to 1947.

The previous worst quarterly contraction, a 10 percent drop, occurred in 1958 during the Eisenhower administration. News of the contraction came as the US also reported its second consecutive week in which the number of people seeking unemployment benefits ticked upwards, hinting at signs of a faltering recovery.

Last quarter's drop followed a 5 percent fall in the January-March quarter, during which the economy officially entered a recession triggered by the virus, ending an 11-year economic expansion, the longest on record in the United States.

The contraction last quarter was driven by a deep pullback in consumer spending, which accounts for about 70 percent of economic activity. Spending by consumers collapsed at a 34 percent annual rate as travel all but froze and shutdown orders forced many restaurants, bars, entertainment venues and other retail establishments to close.

Business investment and residential housing also suffered sharp declines last quarter. Government spending, diminished by a loss of tax revenue that forced layoffs, also fell.

The job market, the most important pillar of the economy, has been severely damaged.

Tens of millions of jobs vanished in the recession. More than 1 million laid-off people have applied for unemployment benefits for 18 straight weeks. So far, about one-third of the lost jobs have been recovered, but the resurgent virus will likely continue to slow further gains in the job market.

The virus forced millions of employers to slash jobs as consumers stopped shopping and traveling, and hotels, restaurants and small businesses closed their doors. Most analysts expect the economy to manage a sharp bounce-back in the current July-September quarter. Yet with confirmed coronavirus cases elevated in a majority of states, the economy could worsen in the months ahead.

The Associated Press contributed to this report