US economy grew a record 33.1% annual rate last quarter but the pandemic remains an enormous threat
Oct 29, 2020, 7:36 AM
COSTA MESA, CALIFORNIA - AUGUST 31: Shoppers take an escalator in South Coast Plaza on the day it reopened after closures due to the COVID-19 pandemic on August 31, 2020 in Costa Mesa, California. Indoor malls were allowed to reopen with limited capacity in much of California today amid updated guidelines, but indoor malls in neighboring Los Angeles County remain closed due to the coronavirus. (Photo by Mario Tama/Getty Images)
(Photo by Mario Tama/Getty Images)
(CNN) — The US economy in the summer recovered much of the historically enormous ground it lost in the spring, expanding at the fastest rate on record in the third quarter, the Commerce Department reported Thursday.
Still, the recovery remains incomplete. The economic crisis that Covid-19 brought on is far from over, and the pandemic threatens to plunge the American economy into turmoil again as infection numbers continue to rise rapidly across the country.
The third quarter, however, was one for the record books. Gross domestic product — the broadest measure of economic activity — grew at an annualized and seasonally adjusted rate of 33.1% between July and September. This was a faster rate of expansion than economists had predicted.
It was the fastest growth rate since the government began to track quarterly GDP data in 1947. It represented a sharp, albeit partial, recovery from the prior three months, when the economy contracted at an annualized, seasonally adjusted rate of 31.4%.
The government reports GDP as an annualized rate, which assumes that the growth rate from one quarter to another will continue for a full year. This practice makes it easier to compare data over time.
But with the unprecedented economic woes of the pandemic, some economists suggest actual GDP growth is the better metric to tell the story of America’s economy.
Looking at the quarterly data alone, GDP grew 7.4% from the second to the third quarter, compared with a 9% decline between the first and second quarter.
The rapid growth reflects the restarting of the economy after the spring lockdown, but America is not out of the woods yet. Even though the third quarter’s annualized growth rate was a larger number than the decline in the second quarter, it doesn’t mean the economy has fully bounced back.
The drop between April and June was so severe that even though the third quarter increase is enormous, it’s starting from a much lower base. Comparing the size of the economy in the third quarter to the pre-pandemic fourth quarter of last year hammers this home: The economy is still about 3.5% smaller.
The National Bureau of Economic Research said the pandemic recession started in February, defined as the period between the peak of economic activity and its nadir. Whether the recession is officially behind us isn’t clear yet. If it is, it would have been much shorter than the average downturn.
But economists worry that the econom is slowing down again in the final three months of the year. Meanwhile, Covid-19 infections are spiking again and worries about renewed lockdown restrictions that could deepen the pandemic recession. In Europe, rising infection rates have already led to tighter rules.
Millions of people are still unemployed and rely on government benefits to make ends meet. As of September, the US labor market was still down 10.7 million jobs compared with pre-pandemic times.
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