The Indicator from Planet Money - GDP -32.9%???!!!

This quarter's Gross Domestic Product numbers could be the worst on record. But what do they mean, exactly?

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Content Keywords: economy economy GDP
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Hey everyone. It is Cardiff and Stacy and this is the indicator from planet money today in the show GDP GDP stands for gross domestic product. And it's basically a sum total of all of the goods and services that the US economy produces. It's often considered to be the measure of economic growth GDP includes all the cars in air conditioners in shoes and haircuts an Uber rides and fish tacos and pedicures that the country is producing and buying. Yeah, and so a typical GDP growth number is like 2% a year or maybe in a really great year 3% soccer scores, they'd never end never gets very nice change. The GDP needle just doesn't budge very much. At least it didn't used to that's right. The GDP numbers came out today.

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And for the month of April May and June, that's the second quarter the US economy grew at an annualized rate of -32.9 % that is today's indicator negative 32.9% When I saw this number, I was like our economy shrank by 33% and that is 1/3 of our entire economy write a man that can only happen if you times it was a really scary. So I called up Justin wolfers. He is a professor of economics and public policy at the University of Michigan and I was like, wait a minute is the US economy like 1/3 smaller. Did we just lose a third of the economy? And so did we lose it there? Okay. Okay. It turns out the way that Americans were the GDP to tistics is a little more confusing than you might realize.

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What actually happened is in the second quarter? We produced 9 1/2 to simplest and we did in the first quarter. You might think we should report that is a decline in GDP of nine and a half percent. What we do instead is we say if we continue to plummet at that right for an entire year at the end of the year how much level would jdpp? That's what 32.9% is. It says if the economy kept declining at a rate of 9 1/2 Cent quarter after quarter after quarter of the quota for quarters later a level of output would be 32.9 simplest. Now, that's unrealistic. This was the worst quarter probably in American history looking at is that in April May and June the economy shrank by about nine and a half percent from the first three months of the year, which is way better than an economy that ranked at 32.9.

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10% but that number still makes April May and June the worst three months in the history of the US economy. That's right. But Justin also was quick to this GDP report is not like the other ones will explain why right after a quick break.

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In April May and June the US economy shrank by nine and a half percent is the biggest drop on record as Chief Economist at Grant Thornton in Chicago. Is it when she saw the numbers this morning? She was not surprised. She didn't making calculations for weeks and she kind of just knew this was coming but still these numbers really hit her hard. I've I've literally felt my stomach churn is number. So come out and felt like I was punched in the gut here is why Diane says when she sees a number like negative 9.5% GDP growth under really see a number. She sees all the things and all of the people behind that number millions of people losing their jobs their homes their businesses. Then you can't delineate the Eagan outlet pain that we've seen every single number every single person that applies for unemployment insurance has a story and they have a life A Life That's at tightening of being destroyed.

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Just by the threat of a virus, but but I also buy the economically Devastation has caused and we know that economic Devastation hurts people's Health as well mental and physical health. So this is a humanitarian crisis the likes of which no one in recent memory has has any experience with and this is an especially hard because right now a lot of the economic aid in stimulus that Congress had given the economy back in March is expiring for instance the extra $600 a week that Congress added to unemployment benefits is expiring and that means millions of people will see their incomes drop in half overnight. Also, the moratorium on some evictions is lifting which means millions of people could lose their home all at once and that's what's so worrisome. Especially as we're on the precipice of everything from expanded unemployment benefits expiring to moratoriums on eviction.

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Aspiring we could be talking about food insecurity and homelessness fit are more akin to the Great Depression than any time in our history, but there is one big difference between the current economic crisis in the Great Depression a difference. It makes measuring this moment really hard. That's covid-19. Yes, the economic shutdowns across the country have meant that a lot of businesses were forced to close forced to lay people off. But a lot of that could be temporary. Hopefully most of those restaurants with tells bars hair salons clothing stores will open back up. We hire people and start selling stuff again, when they do GDP will go up probably shoot up because a lot of it will happen all at once really quickly. So Justin wolfers says the real question he is asking looking at that -9 and a half percent is how much of it is permanent and how much of it is directly pandemic in Juiced.

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Present company is temporary. The question is do we bounce all the way back the way we were halfway back?

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More or less and that has massive implications to have the subsequent few years player. As our economy is in this kind of suspended animation in to really understand what covid-19 has done to the US economy. We will have to wait until restaurants and hair salons and bars and offices reopen in the virus is under control and we can all start to get back to business.

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This episode of the indicator was produced by Camille Peterson fact-checked by Britney Cronin. The indicator is edited by Patty Hearst and is a production of NPR.

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