The U.S. economy grew at a 32 percent annual rate during the third quarter of the year, estimates indicate.
That is a record pace for economic growth.
Economic output had shrunk by a 31.4 percent annual rate in the second quarter, as a result of the coronavirus lockdowns.
“Strong consumer spending helped propel the economy in the third quarter that ended Wednesday,” reports The Wall Street Journal.
“Job growth averaged more than 2.5 million per month through the late spring and summer,” Reuters reports.
“On September 24, the U.S. Census Bureau reported sales of new single-family homes increased by 46,000 units (4.8%) in August to 1,011,000 units at an annual rate, well above market expectations and the highest since 2006,” the U.S. Department of Commerce reports. “The August strength in new and existing home sales shows a sector that has fully recovered from the pandemic shutdowns, and which has benefitted from low interest rates.”
Manufacturing continued to increase, though at a slower pace.
“New orders for manufactured durable goods in August increased $1.0 billion or 0.4 percent to $232.8 billion,” the Commerce Department reports. “This increase, up four consecutive months, followed an 11.7 percent July increase.”
Economists surveyed by Dow Jones forecast the September employment numbers will show the economy added 800,000 jobs and unemployment has decreased to 8.2 percent.
Some of the numbers indicate economic growth will be much less in the fourth quarter. Job growth has slowed, and restaurant bookings and small business employment have “stalled,” according to Reuters.
“The U.S. employment report for September, which is due to be released on Friday, is expected to show a slowing pace of job growth, with the economy still 11 million jobs short of the February level,” Reuters reports.
Personal income was 2.7 percent less in August than in July, the U.S. Department of Commerce said today, in part because the per-person federal unemployment subsidy was cut from $600 to $300. Economists had expected a 2.4 percent decline in personal income for the month.
Consumer spending rose by 1.0 percent in August even though personal income fell. Spending rose by 1.5 percent in July. Economists had forecast a 0.8 percent increase for August.
Consumer spending makes up more than two-thirds of economic activity in the United States.
The recession was entirely a creation of government, says Richard Ebeling, the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel.
“The economic collapse from March to May had one and only one cause behind it: the government’s response to the coronavirus,” said Ebeling. “Governments at the federal and especially at the state levels commanded the shutdown of almost the entire economy.
“The governmental dictates were clear and categorical: close factory doors, do not go to work, stop shopping except for government-permitted ‘essentials,’ and stay at home in near-complete isolation,” Ebeling said. “Obviously, production and output in many sectors of the economy would decline, unemployment would dramatically rise, and retail businesses would suffer catastrophic losses.”
The government-induced nature of the recession meant businesses could create a strong V-shaped recovery as restrictions were eased, with a sharp increase in economic activity following a severe decline, Ebeling says.
“In the most direct way, this was a government-created recession of historic proportions,” Ebeling said. “Precisely because of this, as soon as state and federal restrictions and prohibitions began to be lifted, factories reopened, people began going back to work and once again earned paychecks, and retail businesses began to have customers and sales once more.”
The economy still has much damage to overcome, Ebeling says.
“We have seen that a government-mandated economic shutdown for only three or four months is not only devastating in its general effects, but makes the financial recovery of some businesses not just difficult but impossible in some instances,” Ebeling said. “In other words, a good number of businesses will never come back.”
The private sector is the real hero of this story, says Ebeling.
“This has been a government-caused supply-side recession, and it is and will be a supply-side recovery as government eases up on remaining restrictions and prohibitions,” Ebeling said.