The 32.9% year-on-year plunge in gross domestic product (GDP) for the recession-hit U.S. economy in the second quarter -- the largest quarterly decline on record -- has taken away the only major advantage president Donald Trump has over Democratic challenger Joe Biden.
Most major polls taken since the second quarter shows Biden beating Trump in all major categories such as leadership, approval rating and handling the COVID-19 crisis. Trump's only enduring advantage is the perception he's better at managing the economy than Biden.
The historic GDP plunge of 32.9% in Q2 is bound to damage Trump's only advantage over Trump, say political pundits. A recent poll taken before the release of the Q2 data confirms this outcome.
In this poll, American voters said their most important political concerns heading into the election on November 3 are the raging COVID-19 pandemic and public health. Thirty-seven percent of voters said the pandemic will be the number one issue on their minds if they went to elect the next U.S. president today. The economy took the number two slot in the poll conducted by Fortune-SurveyMonkey from July 17 to 21.
On the other hand, fears over the rising spread of COVID-19 beat economic worries by a huge margin, with a 13-point difference between the two. This poll shows Biden and Trump almost equal among voters that were asked as to which is the better economic manager. The Q2 GDP plunge will be a positive for Biden in the next poll considering the bad numbers.
Q1 GDP fell 5% and went on to plunge much further to 32.9% in Q2. On a quarter-to-quarter basis, the Q2 decline was 1.8%, said a report released Thursday by the U.S. Department of Commerce.
The commerce department report "just highlights how deep and dark the hole is that the economy cratered into in Q2," said Mark Zandi, chief economist at Moody's Analytics. "It's a very deep and dark hole and we're coming out of it, but it' going to take a long time to get out."
Some economists pointed out neither the Great Depression of 1939 nor any other economic slump over the past two centuries have ever been as bad as this. The previous quarterly low was a 10% drop in the first quarter of 1958. On the other hand, the worst plunge in recorded history came in Q2 1921.
In the real world, these numbers mean one in five American workers (more than 30 million workers) are jobless, while hundreds of thousands of businesses have shut and those that do remain open are fighting for their lives as customers stay at home. The result of these factors is a 34.6% plunge in consumer spending, which accounts for more than 60% of U.S. economic growth. Purchases dropped 11.3%.
Before the Q2 plunge, U.S. GDP had never contracted by more than 10% in any quarter since the federal government began keeping records after World War Two.
"The virus is the boss," said corporate economist Robert Frick of Navy Federal Credit Union based in Virginia. "The longer this goes on, the deeper the damage."
On Thursday, the federal government reported the number of Americans filing new unemployment claims benefits last week came to a total of 1.434 million. This marks the 19th straight week where initial claims hit at least one million and the second straight week where initial claims rose after decreasing for 15 straight weeks.