White House economic adviser Larry Kudlow said that, as America’s economy opens up, output in the third quarter could surge by 21.5 percent, which he said, if it materializes, would make it “the biggest growth quarter in American history.”
Kudlow, speaking at a White House meeting Wednesday with the governors of Arkansas and Kansas, based his comments on revised economic estimates by the Congressional Budget Office, which predicted a second-quarter annualized contraction of 37.7 percent that the presidential adviser called a “predictably rough pandemic contraction.”
As states have imposed restrictions on work and travel, the second quarter of 2020 has been widely predicted to be the worst in American history, with Federal Reserve Chairman Jerome Powell recently estimating gross domestic product (GDP) in Q2 would fall by between 30 and 40 percent.
But as states begin to lift lockdowns, there are signs of green shoots in the economy.
Arkansas Gov. Asa Hutchinson, a Republican, told President Donald Trump at the meeting that his state is “back to work” and that the state’s sales tax revenue will likely bounce back faster than expected.
“We’re back to work today. All of our retail stores are open, all of our retail establishments totally are open, our gyms are open. Our barbers are open, our restaurants,” Hutchinson said, adding that some restrictions like limits on occupancy remained in place.
“We’re emphasizing associate social distancing, but we’re at work,” he said.
For that reason, Hutchinson said he now projects the state’s sales tax revenue will be down only 5 percent, not the 10 percent he earlier projected.
“We’re going to open up. I call it ’transition to greatness,'” Trump said, adding, “and when Larry Kudlow tells you the numbers, those are really surprisingly good numbers.”
“I think you’re going to have a very good fourth quarter,” Trump added, calling the third quarter “a great transition period.”
“States are opening up, some rapidly, safely,” the president insisted.
Kudlow, citing the Congressional Budget Office, then predicted 21.5 percent quarterly annualized GDP growth, saying, “Which would actually, if it came true, would be the biggest growth quarter in American history, or since the data were compiled.”
Millions more Americans filed for unemployment benefits last week as backlogs continue to be cleared and disruptions from the virus unleash a second wave of layoffs, pointing to another month of staggering job losses in May.
Initial claims for state unemployment benefits totaled a seasonally adjusted 2.4 million for the week ended May 16, the Labor Department said on Thursday. This brings the total number of first-time jobless applications to 38.6 million in the nine weeks since the pandemic hit America’s economy.
The economy lost a record 20.5 million jobs in April, on top of the 881,000 shed in March.
Still, initial jobless claims have been gradually declining since hitting a record 6.867 million in the week ended March 28.
Vice President Mike Pence told Trump at Wednesday’s meeting that his team was working with states to reopen safely.
“I promise you, this entire team is going to continue to work with governors around the country, at your direction, until we bring the American economy all the way back, as you often say, ‘bigger and better than ever before.’”
