If you drop a ball from a very high window, you can expect a big bounce. The ball, however, has still been dropped.
Thursday’s release of the US’s gross domestic product (GDP) figures are Donald Trump’s last chance to claim he has been a great president for the economy before the election. And boy did he claim it.
Trump has long led Joe Biden in opinion polls on his handling of the economy. While that lead is slipping, the news may be enough to win him back votes he needs as he continues to trail in the polls.
But no matter what Trump says the headline GDP figures do not show an economy that has escaped the ravages of Covid-19. Rather they illustrate, once again, how unfair the US economy has become – especially for poor people, minorities, women and the young.
GDP shot up 33% on an annualized rate in the third quarter after dropping 31% in the second quarter. The percentage increase is on a smaller economy, and the economy is still 3.9% smaller than it was at the end of 2019. For comparison US GDP fell 4.3% from its peak at the end of 2007 to its trough in spring of 2009, what was then the largest decline in the postwar era. Never before have we seen such a huge slump in economic activity in such a short time nor such a surge back.
Much of the bounce has been fueled by consumer spending from those lucky enough to have been able to ride out the pandemic working from home and by the huge government stimulus package agreed in the early days of the pandemic.
That recovery came as states opened up for business again. But now Covid infections are hitting new daily highs, it is uncertain how long that can last. El Paso has already brought in new lockdowns, Chicago is moving in that direction, Wisconsin is in crisis.
On top of that in congressional talks about a new round of stimulus have stalled. For most people the $1,200 stimulus cheques handed out in March have long gone. Most of the $1.6tn in the so-called Cares Act, which paid for expanded unemployment benefits, forgivable business loans and cash payments for households, hospitals, cities and states, had gone by June, according to an analysis by the Wall Street Journal.
The $600 extra in unemployment benefits ran out in July, leaving unemployed people around the country struggling to pay rent, food and bills. According to the Census Bureau four in 10 American children live in households that are struggling to afford basic expenses such as food and medical bills.
The GDP figure also needs to be set against a picture of widening racial economic inequality in the US. The pandemic hit women, poor people and people of colour hardest and they continue to suffer.
Black and Latino people are overrepresented in the leisure and hospitality industries that were hardest hit by quarantine measures and continue to suffer as tourism and travel remain depressed.
Only one in four Americans has a job that allows them to work from home, according to the Bureau of Labor Statistics. And people of color represent the largest share of those whose jobs cannot be done from their kitchen tables.
Nationally the unemployment rate is now 7.9%, for Black Americans it is 12.1% and for Black teens (16-19) it is over 20%.
Meanwhile house prices in some areas are booming, stock markets may be wobbling but they remain high. There was a ferocious price war this summer for rentals in the sun-baked Hamptons.
Trump has long predicted a V-shaped recovery – a sharp fall followed by and equally sharp recovery. That V has flattened as job numbers continue to weaken. Some economists are now talking about a K-shaped “recovery” – one where the well-off, asset-rich, work-from-home class escape the recession on the uptick of the K while the poor slide further into an epidemic of evictions and unpaid bills.
Jason Reed, assistant chair of finance at the University of Notre Dame, says the recovery is real but he too thinks it could take years for minorities to recover the ground they have lost in the pandemic. “We will see this [K-shaped] disparity continue in 2021, 2022 unless Congress acts,” he said.
Large sections of the US economy have proven amazingly resilient and adaptable in the face of this unprecedented challenge. Today’s GDP figures show that. But Covid-19 is not finished with the US, or the rest of the world, and for far too many Americans this crisis is still far from over. The ball is still up in the air.