GDP rebounds, but economy still hurting

Unemployment claims remain above pre-COVID record and on the increase in Illinois

A Chicago restaurant makes the transition to outdoor dining ahead of the clampdown on indoor service set to take effect Friday. (One Illinois/Ted Cox)

By Ted Cox

The economy recovered to technically halt the recession in figures announced Thursday, but did not fully regain the losses from the pandemic, as new unemployment claims remained above the pre-COVID record.

That was the uneven economic news Thursday as the U.S. Commerce Department’s Bureau of Economic Analysis announced that the U.S. economy grew 7.4 percent in the third quarter ending with September — a record-shattering quarterly increase that ironically illustrated just how far the economy dived in the second quarter.

Third-quarter growth, compared to the second quarter running from April through June, projected to a stunning annual increase of 33.1 percent, according to the bureau. No quarter has approached that figure since the federal government began formal record keeping after World War II. But the growth did not make up for the even more staggering decline of 9 percent suffered in the second quarter.

Combined with the slight quarterly decline in GDP in the first quarter, brought on when COVID-19 shutdowns gripped the economy and more than 10 million people filed for unemployment in March, that put the U.S. economy in a recession — defined as two straight quarters of economic decline. The third-quarter rebound technically ends the recession, but the economy remained below the level it was at in the last quarter of last year.

The New York Times reported the overall economy stood at 3.5 percent smaller than it was in the fourth quarter of last year. By comparison, the Great Recession produced a larger drop, 4 percent, but also over an extended period, 18 months. The economy crashed in the second quarter of this year, and failed to fully achieve the so-called V-shaped recovery the Trump administration had hoped for.

That was borne out in the stubbornly high new claims for unemployment insurance announced Thursday by the U.S. Department of Labor. The department’s weekly unemployment report found that 750,000 newly idled workers filed for benefits last week, down 40,000 from the week before, to set a new one-week low in the pandemic. But that still remained above the pre-COVID record of 695,000 new claims in a week, set 38 years ago during the 1982 Reagan recession.

According to state breakdowns from the Labor Department, new claims were actually on the increase in Illinois: 55,000 last week, up from 47,000 the week before. That included expanded federal claims for independent contractors, freelancers, and so-called gig workers under the Pandemic Unemployment Assistance program, which likewise rose slightly to 8,700 last week.

The department estimated that 22.7 million workers nationwide were receiving some form of unemployment benefits as of Oct. 10, down more than 400,000 from the previous week, but 15 times higher than the 1.4 million on unemployment insurance a year ago.

That suggested a continued slow recovery from the damage done by the pandemic, especially as COVID-19 infections spike across much of the nation, including Illinois.

Bank of America economist Michelle Meyer told The New York Times: “The reason we had such a big bounce is that the economy went from closed to partially open. The easy growth was exhausted, and now the hard work has to be done in terms of fully healing.”