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“The economy is essentially still in freefall because of the shutdown, there is no question about that and the pandemic contraction in 2Q is going to be very difficult,” top White House Economic Advisor Larry Kudlow told FOX Business.
A new GDP forecast from the Federal Reserve Bank of Atlanta for the three months through June estimates an unprecedented drop of 42.8 percent. The bank describes the data as a "nowcast" or real-time, compared with the official government report of GDP, which is dated. The first-quarter preliminary data, which showed a 4.8 percent dip, included a limited period of impact from COVID-19.
Piecemeal data backs up the ominous trend. On Friday, reports showed U.S. retail sales plunged a record 16.4 percent in April, while industrial production fell 11.2 percent, the most ever.
A fresh report on unemployment, meanwhile, showed 2.98 million Americans filed for weekly unemployment benefits, pushing the total since the pandemic to over 36 million, a level not seen since the Great Depression.
In April, the unemployment rate skyrocketed to 14.7 percent -- the highest since the '30s after falling to a low of 3.5 percent pre-COVID-19.
Despite the dour trends, the president's economic team believes a rebound can take place in the second half of the year.
“We've still got some more bad news to take in, but by the time we get to the third quarter and the fourth quarter and next year, things are going to be a lot greater. We’re kind of transitioning back to the very, very strong economy we had,” said White House adviser Kevin Hassett.
Even with that optimism, Federal Reserve Chairman Jerome Powell warned on Wednesday that the government may need to do more to prevent a "prolonged recession and weak recovery."
U.S. stocks fell across the board for the week, with the Dow Jones Industrial Average tumbling 2.65 percent while the S&P 500 fell 2.26 percent, the worst weekly performances for the indexes since March. The Nasdaq Composite dropped1.17 percent.