Many determinant events will likely boost another round of economic collapse. The US GDP has dropped to levels never seen before in history. And despite the belief there will be a rebound in the third quarter, there is plenty of reason to believe things will get worse. In this video, we discuss how the recent unfoldings will create another economic meltdown.
Considering the generalized lockdowns drastically collapsed the economic activity, the GDP dropped to rates last seen in 1958. But as states started to reopen, regaining a few jobs, the third-quarter GDP is expected to show a significant rebound. However, as we approach the end of the year, many aggravating events, such as another round in bankruptcy files and lay-offs, and another surge of viral cases are still going to resonate their effects in the beaten US economy.
Recent evaluations indicate that even if we record a rebound on the third-quarter GDP, the US economy will shrink this year, for the first time since the Great Recession. In the April-June quarter, the GDP declined at a rate of 31.4%, the largest decline in U.S. history.
The unprecedented economic plunge documented in the spring may lead to a reversal effect, in which the GDP could register a record rebound. However, this only means the drop was so deep that to get out of the economic rock bottom a major spike had to happen. That is to say, since some businesses have reopened and people have gone back to work, a significant bounce could be seen, but economists affirm it is still a longshot and it will not be translated into economic growth.
Quite the opposite, forecasts suggest that economic growth will dramatically fall in the final three months of this year to 4%, leaving America on the brink of another deep recession if Congress doesn’t approve another stimulus bill or if there is a resurgence of viral cases. Right now, there are spikes in infections occurring in some regions of the country, including New York.
The estimated 4% GDP fall would mark the first annual decline in GDP, signaling an end to an almost 11-year-long economic expansion. Moreover, as the economic momentum is cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, all the pressure is now on the fragile labor market, which can lead the country to a lot of trouble, because as jobs are being recovered, job losses are mounting, pointing the critical deterioration of the labor market.
Many workers that were re-hired are being let go once again, and others who thought their dismissal was temporary are now being permanently laid-off. 787,000 initial claims for unemployment insurance were filed last week, but the real numbers are likely to be much bigger than that. So far, almost 60 million people have sought benefits, but as the health outbreak lingers, employers continue to lay off hundreds of thousands of workers.
The unemployment figures track the course of the virus, and the rate of positive viral tests has been staying high. This can induce states to pause or roll back plans to reopen businesses, slowing the rehiring of workers or laying off workers for a second time, as they run out of federal aid, and businesses struggle with sharply reduced revenue.
To make things worse, companies are announcing massive lay-offs to take place before December. As many as 50,000 airline employees will be laid-off starting Thursday. Collectively, American Airlines and United Airlines will let 32,000 employees go. Allstate communicated that it will be laying off 3,800 employees, and Disney has scheduled 28,000 lay-offs to happen by December, at least a quarter of those job losses will come from Florida, counting 6,390 dismissals and the numbers could get even bigger.
We also analyzed the stories of some workers to illustrate the instability of the labor market, giving us reason to imply that much more distress is coming for us. In short, the gain in jobs from the recall of workers on temporary layoff is hiding an increasing number of permanent job losses, and none of these second layoffs are reflected in the most recent numbers from the Labor Department. Furthermore, the situation of many workers many not allow them to find a job in their field any time soon. So everything points to the fact that things are not going to “come back to normal” any time soon. By the year-end, we will witness a colossal breakdown of the American economy.