The longest economic expansion in the United States officially ended on Wednesday when the Commerce Department gross domestic product reported in the first quarter fell 4.8%.
There was not a single economist who predicted anything other than a deep drop in GDP. Still, it was hard to see how COVID-19 could bring down the world’s largest economy in the final weeks of the quarter.
“The U.S. economy came to an abrupt halt in March as workers were sent home and told to stay while the nation battled COVID-19,” Wells Fargo the economists said in a report. “No corner of the economy is immune to this public health crisis.”
The worst pandemic in more than a century has wiped out all job gains since the Great Recession. In the past five weeks, 26.5 million Americans have filed for unemployment, according to Department of Labor The data. On Thursday, when the next round of initial claims data is released, economists expect at least 3.5 million more will be added to the tally.
The first-quarter GDP report released on Thursday is the government’s first estimate of the country’s economic health. On May 28, it will publish its second estimate for the same period containing more complete data.
Look for it to be even worse, Goldman Sachs say economists.
“We continue to believe that the economic reality during the quarter was even worse than that,” the economists said in a report. The preliminary figure “hides a ‘genuine’ drop in GDP which we now estimate at around -8%”.
In the past, economic forecasts didn’t typically read like infectious disease reports, but that’s become the norm as U.S. financial markets try to gauge the pandemic’s continued impact on GDP.
“The specific characteristics of the coronavirus – it is highly contagious and many infected people are asymptomatic – make this pandemic particularly difficult to control,” a statement said. Moody’s Investors Service says the report. “Strategies for successful reopening of economies may therefore need to include mass testing combined with aggressive contact tracing and selective quarantine.”
The containment strategy that Moody’s and many others have endorsed — testing people and tracing their contacts — is a proven method of disease control that dates back more than a century.
But, somehow, in modern America, implementing this approach on a national scale has so far proved elusive.
The United States has conducted 5.8 million COVID-19 tests, covering about 1.5% of the population. On a per capita basis, the pace of testing is lower than Italy, Germany, Canada and five other countries.
Without widespread testing to determine the spread of the disease, Americans had to act as if everyone had it. US states have been forced to order residents to stay home, shutting down their economies, to avoid overwhelming their hospital systems, as had happened in Italy and China.
By the time the GDP data was released Thursday morning, 58,355 Americans had died of COVID-19 in less than three months — more than all American casualties from the Vietnam War, which lasted more than a decade.
Today, the United States ranks first in the world for deaths from COVID-19, more than double the 27,359 deaths in the No. 2 country, Italy.