The U.S. economy grew at an unrivalled pace in the third quarter as the government poured out more than $3 trillion US worth of pandemic relief that fuelled consumer spending, but the deep scars from the COVID-19 recession could take a year or more to heal.
Gross domestic product rebounded at a 33.1 per cent annualized rate last quarter, the Commerce Department said in its advance estimate on Thursday. That was the fastest pace since the government started keeping records in 1947 and followed a historic shrinkage rate of 31.4 per cent in the second quarter.
The GDP report — one of the last major economic scorecards before next week’s presidential election — will do little to mitigate the human tragedy inflicted by the coronavirus pandemic, with tens of millions Americans still unemployed and more than 222,000 dead.
With five days remaining to Election Day, President Donald Trump, trailing in most national opinion polls, will probably seize on the stunning rebound in GDP as a sign of recovery. But U.S. output remains below its level in the fourth quarter of 2019, a fact Trump’s Democratic challenger Joe Biden is almost certain to highlight along with signs that the growth spurt is fast petering out.
Economists polled by Reuters had forecast the economy expanding at a 31 per cent rate in the July-September quarter. The economy slipped into recession in February.
“We expect minimal growth in [the fourth quarter] as consumer and business anxiety can only increase amid rising virus infections,” BMO senior economist Sal Guatieri said in a commentary.
With no further U.S. government aid in sight this year, Goldman Sachs has slashed its growth forecast for the current fourth quarter to a three per cent annual rate from six per cent.
Unemployment benefits claims down
The government’s rescue package provided a lifeline for many businesses and the unemployed, juicing up consumer spending, which on its own powered the surge in GDP. But government funding has been depleted with no deal in sight for another round of relief. New COVID-19 cases are spiralling across the country, forcing restrictions on businesses like restaurants and bars.
Slightly more than half of the 22.2 million jobs lost during the pandemic have been recouped, and layoffs persist.
A separate report from the Labour Department on Thursday showed 751,000 people filed for state unemployment benefits in the week ending Oct. 24, compared to 791,000 in the previous period. Though claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak seen during the 2007-09 recession.