GDP -32.9%???!!!


N. P. R.. Hey everyone. It is Cardiff and Stacey, and this is the indicator from planet money today on the show GDP GDP stands for gross domestic product and it's basically a sum total of all of the goods and services that the US economy produces. It's often considered to be the measure of economic growth. Yep. GDP includes all the cars, an air conditioners in shoes and haircuts Uber Rides, and fish tacos and pedicures that the country is producing and buying. And so atypical GDP growth number is like two percent a year or maybe a really great year three percent. It's like soccer scores they never it never gets very. Stay pretty low and that's because the US economy is enormous. So even when a lot of things change the GDP needle doesn't budge very much at least it didn't used to. That's right. The GDP numbers came out today and for the months of April May and June that's the second quarter. The US economy grew at an annualized rate of negative thirty two point nine percent that is today's indicator negative thirty, two, point nine percent and I have to see if I saw this number I was like our economy shrank by thirty three percents I mean that is a third of our entire economy, right? I mean that can only happen a few times. It was really scary. So I called up Justin Wolfer as he is a professor of economics and public policy at the University of Michigan. And I was like wait a minute is the US economy like one third smaller? Did we just lose a third of the economy and so did we lose their economy? In. Okay. Okay. It turns out the way that Americans report the GDP. is a little more confusing than you might realize. What actually happened is in the second quarter, we produced nine and a half percent less than we did in the first quarter. You might think we should report that as a decline in GDP of nine and a half percent. Yes. What we do instead is we say if we continued to plummet at that right for an entire year. At the end of the year, how much lower would GDP? That's what thirty two point nine percents. it says if the economy kept declining at a right of nine and a half sin quarter after quarter after quarter after quarter four quarters later, a level of output would be good. Two point nine percent lists now that's unrealistic. This was the worst quarter. Probably. In American history. So. Yeah. Let's say you do not try to extrapolate for the whole year. Then what you're looking at is that in April May and June the economy shrank by about nine and a half percent from the first three months of the year, which is way better than an economy that shrink at thirty, two point nine percent. But. That number still makes April May and June. The worst three months in the history of the US economy. That's right but just in also is quick to add this GDP report is not like the other ones. Explain why right after a quick break? Support for this podcast and the following message come from Barracuda Khuda total email protection according to the FBI last year cybercrimes cost three point five, billion dollars get the free e book thirteen email threat types to know about right now at Barracuda dot com slash NPR. In April May and June, the US economy shrank by nine and a half percent it is the biggest drop on record. Dan swonk is chief economist at Grant Thornton. In Chicago, she says it when she saw the numbers this morning, she was not surprised. She had been making calculations for weeks and she kinda just knew this was coming but still these numbers really hit her hard. I've. I've literally felt my stomach churn numbers have come out and felt like I was punched in the Gut. Here is why Diane's is when she sees a number like negative nine, point five percent, GDP growth. She's a really see a number. She sees all the things and all of the people behind that number millions of people losing their jobs, their homes businesses, and you can't delineate the economic pain that we've seen every single number every single. Person that applies for unemployment insurance has a story and they have a life a life. Threatening, of being destroyed not just by the threat of a virus, but but I, also by the economic devastation caused and we know that economic devastation hurts people's health as well mental and physical health. So this is a humanitarian crisis the likes of which no one in recent memory has has any experience with. And this is an especially hard moment to see numbers like this. Dan says because right now a lot. The economic aid in stimulus that Congress had given the economy back in March is expiring. For instance, the extra six, hundred dollars a week that Congress added to unemployment benefits is expiring and that means millions of people will see their incomes drop in half overnight. Also, the moratorium on some evictions lifting, which means millions of people could lose their homes all at once, and that's what's so worrisome especially as we're on the precipice of everything from expanded unemployment benefits expiring to moratoriums convictions expiring, we could be talking about Food Insecurity and homelessness that are more akin to the Great Depression than any time in our history. But there is one big difference between the current crisis. In the Great Depression a difference it makes measuring this moment really hard. That's covid nineteen. Yes. The economic shutdowns across the country have meant that a lot of businesses were forced to close forced to lay people off but a lot of that could be temporary. Hopefully most of those restaurants, hotels, bars, hair salons, clothing stores. Will Open back up Rehire people and start selling stuff again when they do, GDP will go up probably shoot up because a lot of it will happen all at once really quickly. So Justin Wolfer says the real question he is asking looking at that negative nine and a half percent is how much of it is permanent and how much of it is directly pandemic in just Doesn't. It's temporary. We Ha- we Yes. It's temporary. It's a temporary downswing. The question is do we bounce all the way back to where we were halfway back? More lists and that has massive implications for how the subsequent. Playoff. For now, Justin says our economy is in this kind of suspended animation. And to really understand what covid nineteen has done to the US economy, we will have to wait until restaurants in hair salons and bars and offices reopened. In, the virus is under control and we can all start to get back to business. This episode the indicator was produced by Camille Peterson fact checked by Cronin the indicator is edited by Paddy Hirsch and as a production of NPR. Until, recently, admit Hong says he didn't speak out against racism because he was scared. Listen now on the codes which podcast from NPR.

Coming up next