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New York (CNN Business)The US economy contracted at a 32.9% annual rate from April through June, its worst drop on record, the Bureau of Economic Analysis said Thursday.
Business ground to a halt during the pandemic lockdown in the spring of this year, and America plunged into its first recession in 11 years, putting an end to the longest economic expansion in US history.
A recession is commonly defined as two consecutive quarters of declining gross domestic product — the broadest measure of the economy. Between January and March, GDP declined by an annualized rate of 5%.
But this is no ordinary recession. The combination of public health and economic crises is unprecedented, and numbers cannot fully convey the hardships millions of Americans are facing.
In April, more than 20 million American jobs vanished as businesses closed and most of the country was under stay-at-home orders. It was the biggest drop in jobs since record-keeping began more than 80 years ago. Claims for unemployment benefits skyrocketed and have still not recovered to pre-pandemic levels.
While the labor market has been rebounding since states began to reopen, bringing millions back to work, the country is still down nearly 15 million jobs since February. Next week's July jobs report is expected to show another 2.3 million jobs added. That would bring the unemployment rate down to 10.3% — still higher than during the worst period of the financial crisis.
Consumer spending, the biggest driver of the US economy, declined at an annual rate of 34.6% — by far the sharpest decline on record.
The worst quarter ever
The pandemic pushed the economy off a cliff. The second-quarter GDP drop was nearly four times worse than during the peak of the financial crisis, when the economy contracted 8.4% in the fourth quarter of 2008.
Quarterly GDP numbers are expressed as an annualized rate. This means that the economy didn't actually contract by a third from the first quarter to the second. The annualized rate measures how much the economy would grow or shrink if conditions were to persist for 12 months.
Not annualized, GDP declined by 9.5% in between April and June, or by $1.8 trillion.
But by either measure, it was still the worst quarter on record.
The US only began keeping quarterly GDP records in 1947, so it's difficult to compare the current downturn to the Great Depression. That said, in 1932 the US economy contracted 12.9%.
Earlier quarterly declines also pale in comparison to this year.
Between April and June of 1980, the economy contracted 8% on the heels of rising oil prices and restrictive monetary policy to control inflation.
In the first three months of 1958, GDP declined by 10%, as production slowed and high interest rates put an end to the post-World War II expansion. The downturn followed the Asian flu pandemic of the previous year, which killed 116,000 people in the United States, according to the Center for Disease Control.
This is a developing story. It will be updated
