US Economy Shrank a Stunning 33%, Fed Predicts Slow Recovery as Pandemic Undermines Growth

WASHINGTON – Two new reports out today are reminding Americans of just how bad the economic impact of the pandemic has been. The US economy shrank a record-breaking 33% last quarter. And another 1.4 million Americans applied for unemployment benefits last week.

The Federal Reserve is signaling it predicts slow economic growth and hiring in the next few months because of COVID-19 and how the latest wave is dragging down the economy. 

Fed Chair Jerome Powell made the announcement Wednesday, adding that low-interest rates and debt buyback will continue. 

"Indeed, we have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity," said Powell. 

This comes as Democrats and Republicans on Capitol Hill struggle to reach an agreement over another stimulus plan. At the heart of the issue is a $600 per week unemployment benefit that expires in just a matter of days. Note, that's $600 on top of the normal unemployment benefits. Democrats want to keep the program going while Republicans would like to scale it back. 

Economist Stephen Moore says that $600 stimulus has had many "harmful effects" on the economy. 

"I estimate we have about one or two million more Americans working today who are mad for the fact that workers are getting, unemployed workers, in some cases, twice as much money for not working as working," Moore told CBN's Faith Nation. "That's just bad economic policy. It's just not fair to the people in this country who are working to have somebody next door getting more money who's staying at home sitting on the couch."

One encouraging sign may be the grant money given to Eastman Kodak to begin helping manufacture pharmaceuticals. 

Meanwhile, the economy is taking center stage on the campaign trail. 

In Midland, Texas, the heart of American energy production, President Trump blasted Democrats and his opponent, Joe Biden, for their green energy plan. 

"Their platform calls for mandating zero carbon emissions from power plants by 2035," said Trump. "In other words, no drilling, no fracking, no coal, no shale, no gas, no oil." 

Biden also took a swing at Trump over the economy. 

"He's shown that he can't beat pandemic and keep you safe," said Biden. "He can't turn the economy around and get America back to work." 

The Fed and others like Moore agree the economy won't make a full recovery until there is a successful virus treatment or vaccine. 

"The solution at this point probably is not with the Fed," said Moore. "The most important thing is to get the case loads down and the deaths down from the Coronavirus." 

Health officials say they're cautiously optimistic we'll see a vaccine by the end of 2020. Right now 24 vaccines are in the human testing phase.