American economy reaches back to pre-pandemic size

The American economy has turned the corner, after a brutal experience of contraction.

 American economy reaches back to pre-pandemic size

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• The story: The US was the worst-hit by the Covid-19 pandemic. For many months, the entire country faced medical and economic headwinds, even as political turmoil roiled the nation's sentiment. But finally, now, the economy has climbed out of its pandemic-induced hole in the spring as vaccinations and federal aid fueled a surge in consumer spending at restaurants, resorts and retail stores.
• Details: Gross domestic product grew 1.6 percent in the second quarter, the latest gauge of a rebound that could be challenged by the Delta variant of the coronavirus. The revival brought GDP back to its prepandemic level in the second quarter, adjusted for inflation — exactly one year after the economy’s worst quarterly contraction on record. After the last recession ended in 2009, the G.D.P. took two years to rebound fully.
• Delta rising: The crisis is far from over, though. The rise of the Delta variant of the coronavirus could threaten those gains just as the federal aid programmes that helped bolster the recovery are coming to an end.

1. On an annualized basis, second-quarter growth was 6.5 percent.
2. Robust investment in the quarter signaled that businesses were betting on continued growth. But the recovery is far from complete.
3. Output was significantly below where it would be had growth continued on its prepandemic path, and other economic measures remain deeply depressed, particularly for certain groups. The United States has nearly seven million fewer jobs than before the pandemic. The unemployment rate for Black workers in June was 9.2 percent.
4. The good news was that this was occurring much more rapidly than after the financial crisis.
5. The new threat of highly contagious Delta variant of the coronavirus, that caused cases to soar in much of USA, was visible again. The Centers for Disease Control and Prevention recommended that even vaccinated people should wear masks indoors in some areas, and some mayors and governors have reimposed mask mandates.

• Risks: Widespread business shutdowns or stay-at-home orders may not happen, but if the resurgent virus leads to renewed caution among consumers, that could weaken the recovery at a crucial moment. The reason that is concerning is that this burst of activity around reopening has been driving the economy the past couple months.
• Households strong: There is little evidence so far that either the Delta variant or inflation is making a dent in consumer demand overall. Spending on services was particularly robust in the second quarter as widespread vaccinations and falling virus cases led Americans to return to restaurants, nail salons and other in-person activities. But goods spending remained strong as well, reflecting the healthy financial position of many households after successive rounds of government aid.
• Different strokes: The recovery has been highly unequal. Recent increases in spending have been driven by high-income households. Employment among people with a college degree — many of whom could work from home — fell less in the pandemic and has already returned to its previous level, while employment among those with a high school diploma or less remains millions of jobs below that benchmark. This time, workers and businesses may have to face the pandemic without much help from the federal government.

1. Roughly half the states have cut off enhanced unemployment benefits in recent weeks, and the programs are set to end nationally in September.
2. The Paycheck Protection Program, which helped thousands of small businesses weather the crisis, is winding down. A federal eviction moratorium is scheduled to end this week, though President Biden has asked Congress to extend it. And there is no sign that Congress intends to pass a fourth round of direct checks to households.

• Summary: The American economy has turned the corner, and is likely to do well now.

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