On Thursday, the government announced that the nation’s gross domestic product (GDP) grew by an all-time record 7.4 percent (annualized to 33.1 percent) during the third quarter. This remarkable news follows pandemic-driven annualized declines of 5.8 percent and 31.4 percent during the first and second quarters, respectively.
Predictably, the establishment press, continuing its documented behavior of rigging coverage against President Donald Trump and half the country, downplayed, ignored, and even bitterly ridiculed the news:
- A Saturday morning search at the Associated Press’s APnews.com website on “gross domestic product” did not return a single article about the third-quarter result, but its late-September item on the final release of the second-quarter’s contraction was still present.
- At the NewsBusters blog, the Media Research Center’s Joseph Vazquez noted that the Thursday morning news shows on CBS and NBC failed to even mention the government’s 8:30 a.m. release about the amazing economic recovery, while ABC only briefly ran the news on its chyron.
- Reuters reporter Lucia Mutikani shrieked that the record growth “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” (italics added). For the record, the government’s September jobs release reported there were 12.6 million unemployed Americans.
The historic third-quarter GDP increase clawed back two-thirds of the combined first and second quarter contractions—in just one quarter. In other words, the government’s data told us that we are in a V-shaped recovery. Recall, as I noted in mid-October, that many media outlets, and even the Congressional Budget Office, predicted the economy would take a decade to fully recover from coronavirus lockdowns.
Unfortunately, the quarterly data doesn’t tell the full story. IHS Markit, one of the leading providers of economic intelligence worldwide, has been providing monthly estimates of annualized U.S. GDP since 1992. Its data is particularly relevant this year because the negative effects of the nation’s hard COVID-19 lockdowns included parts of the first and second quarters, while the recovery began during the latter part of the second quarter.
As of Oct. 1, the latest available data from IHS (colored boxes and footnotes are mine) told us that the economy roared back during the first three months after its March-April COVID-19 swoon (figures are in inflation-adjusted 2012 dollars):
IHS estimates that the economy shrunk by a frightening 15.2 percent during March and April, but then grew by 12.4 percent from that bottom during May, June, and July, regaining 70 percent of what was lost. Repeats of July’s +1.5 percent result, although significantly below May and June, would have returned the economy back to or even above where it was at its February peak in just four more months.
IHS further estimates that the economy grew by 0.6 percent in August. That’s a far lower but still acceptable result which, if repeated, would have brought the economy back to its peak in well under a year.
September is a different story. IHS had not released updated results through September by publication time. But because the firm syncs its reporting with the government’s quarterly results, we can reliably estimate that September’s growth was tepid:
What happened in September, and more importantly, what lies ahead in future months? I believe the answer is found in how some governors have handled the pandemic, and the signals they and one of the two major-party presidential candidates have sent about their plans.
After the initial lockdowns, which lasted into mid-May in most states, many industries, including construction, manufacturing, most home services, and others were able to fully resume their work. This would explain why growth in May was strong, and June was even stronger. After that, while these businesses have continued to grow, the pace of their growth has begun to level off to a more typical behavior.
However, significant constraints on so-called “non-essential” businesses — even those that have been allowed to open — have continued. Just a few of the more obvious impediments to resumed growth have included the following:
- Rules ending alcohol sales at bars and restaurants as early as 10 p.m.
- Stringent seating and capacity constraints in those and many other retail establishments.
- Mask requirements in general, which have led many Americans who either cannot wear masks for long periods of time or who object to the requirements on principle to stay away from stores as much as they can.
Even though many retailers and other establishments that serve the public have adjusted to pandemic conditions, the fact remains that “2020 is on track to have the highest number of retail bankruptcies in a decade.”
Job-killing constraints on business activity have been most severe in deep-blue states like New York, which until Sept. 30 had banned indoor dining completely; California, which is still operating under a stay-at-home order, and where “wedding ceremonies are allowed, [but] not receptions”; Illinois, which has reimposed a ban on indoor dining; and many others.
Not coincidentally, almost all of these states have unemployment rates well above September’s 7.9 percent national average. Their governors appear to be unmoved by the widespread misery they have caused. Many have also tolerated the riots and organized looting that have occurred this year in many major cities, leading to widespread business closures in the areas affected.
In August, Democratic presidential candidate Joe Biden promised “he would shut down [the United States] to stop coronavirus if scientists recommended it.” Biden has publicly backtracked, but his cadre of scientific and medical advisers includes people like Ezekiel Emanuel, who called for shutting down the country again just three months ago. That and the fact that fellow Democrats with executive power are keeping severe lockdowns in place indicates his true likely policies if elected.
This means a Biden administration would help spread the financial suffering already seen in so many deep-blue states to the rest of the nation, rekindling what was a historically brief recession and creating conditions that might permanently cripple the economy. But only if Biden wins on Tuesday.