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May, June and July May Have Seen the Best Growth Rates Ever Recorded

May, June and July May Have Seen the Best Growth Rates Ever Recorded
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By Wednesday, 12 August 2020 01:34 PM Current | Bio | Archive

In January and February of this year, the economy was very strong. Then COVID came and the economy shut down.

It began to re-open in May. Starting then and continuing to the present, the economy’s growth has been unprecedented. In fact, May, June and July probably saw the fastest growth rates ever recorded.

The government does not publish monthly growth rates of GDP. The growth rates are measured quarterly. Looking at that quarterly data, it is easy to conclude that the economy is in very poor condition. Afterall GDP declined by a 5% rate in the first quarter and declined by a 33% rate in the second quarter.

The second quarter number represents the biggest quarterly decline ever.

We can estimate monthly activity by looking at the number of jobs added. As companies grow they need to hire more workers, so employment numbers can be used to estimate growth.

We also have data for the change in retail sales for every month. Retail sales is the majority of consumption which makes up 70% of GDP.

In mid-March the economic shutdown resulted in 700,000 workers losing their job. In April, a record 20.5 million workers lost their job. March and April were the only two months this year where GDP actually declined. The March decline was so steep, it dragged down the entire first quarter.

Similarly, the April decline was so very steep it deeply dragged down the entire second quarter.

But judging from the jobs data, May, June and July had GDP growth increasing at the fastest rate ever. In those months more than 9 million jobs were created. That’s more than 40% of all jobs lost during the shutdown. And it occurred in only three months.

In 2018, the economy added 2.7 million jobs for the entire year, about 225,000 per month. President Clinton had the best job creating performance for his entire presidency. He added an average of 2.3 million jobs per year, less than 200,000 per month.

In May of this year 2.5 million jobs were created, nearly doubling the previous monthly record of 1.3 million jobs created during the Reagan administration. With that enormous jobs-growth number, economic activity had to be increasing sharply.

In June a whopping 4.8 million new jobs were created, nearly doubling the record set in May. In July, even with some businesses again shutting down, 1.8 million new jobs were created. If GDP growth figures were available monthly the numbers would easily show the fastest growth ever recorded.

In April the unemployment rate was 14.7% By July the unemployment rate had fallen to 10.2%. That 4.5% decrease in the rate is the largest three-month drop ever recorded.

Further supporting this position, retail sales increased nearly 18% in May and increased by 7.5% in June. On average monthly retail sales increase by a quarter to one half of a percent.

Of course, the increases were possible because the economy had completely shut down. And that is true. But we are looking at the speed of the recovery. The number of jobs indicates a very speedy, V shaped recovery.

The government will report GDP growth for the third quarter of this year in late October. Because July was so strong and August and September are also likely to be very strong. The growth rate for GDP in the third quarter will easily exceed 20%. That will be the highest quarterly growth rate ever recorded.

This analysis raises the question about the need for a second round of stimulus. From an economic standpoint it appears that more stimulus is not needed, especially considering that this year’s budget deficit is already about $4 trillion. Any more stimulus will add to the deficit.

The public debt was $23 trillion before this year. It is now up to $27 trillion. Since Congress is considering another $1 trillion to $2 trillion in additional stimulus, the public debt will be as much as $29 trillion.

From a political standpoint the stimulus is needed and something will likely be passed.

While the U.S. has suffered greatly from shutting down the economy, it appears that the economy is roaring back. At this pace and assuming the current policies are continued after the election, the economy will return to pre-recession levels sometime next year. That means the recovery will have lasted just over one year.

After the 2008/2009 recession, the economy did not recover to pre-recession levels until 2013, some four years after the recession ended and five years after the recession began. That recovery was led by policies from the Obama/Biden administration.

Dr. Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.

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DrMichaelBuslerPhD
In January and February of this year, the economy was very strong. Then COVID came and the economy shut down.
economic, growth, rates, best
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2020-34-12
Wednesday, 12 August 2020 01:34 PM
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