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The Economy Shrank at a Record Pace This Spring. But That’s Not the Really Bad News

The government’s official stats are in, and as you might have expected, the economy shrank a tad this spring while we were all busy huddling in our apartments. Gross domestic product fell at a record 32.9 percent annual rate from April through June—which is to say, that’s how much it would theoretically decline if it kept collapsing at that pace for a full year. Like many economic stats from these past few surreal months, it makes for a kind of funny graph. (Look to the far right.)

Another way to think about it is that economic activity in the second quarter fell 9.5 percent compared to the three months before. (It’s also about 9.5 percent smaller compared with the same quarter a year ago.) Either way you look at the numbers, it’s a big drop. Quarter-on-quarter, almost 62 percent of the decline in activity was due to shrinking spending on services, and health care alone accounted for 26 percent of the plunge, as hospitals were forced to put off surgeries to care for coronavirus patients and Americans delayed visiting the doctor. For obvious reasons, journalists have focused a great deal on the impact of the coronavirus on businesses like restaurants, theme parks, and airlines that have been visibly forced to shut down, and have in some cases seen a bigger share of their own business vanish, as shown on the graph below. But a big piece of the coronavirus recession has been a health care recession.

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