* Third-quarter GDP forecast rebounding at a 31% rate
* Record growth in consumer, business spending expected
* About 775,000 people likely filed jobless claims last week
WASHINGTON, Oct 29 (Reuters) - The U.S. economy likely
experienced record growth in the third quarter as more than $3
trillion in federal pandemic relief spending fueled historic
consumer spending, but the deep scars from the COVID-19
recession could take a year or more to heal.
No one disputes that the Commerce Department's report
Thursday on gross domestic product - one of the last major
economic scorecards before next week's presidential election -
will be one for the history books. Nonetheless, it will do
little to mitigate the human tragedy inflicted by the
coronavirus pandemic, with tens of millions Americans still
unemployed and more than 222,000 dead.
With five days remaining to Election Day and trailing in
most national opinion polls, President Donald Trump will
probably seize on the stunning rebound in GDP as a sign of
recovery following the deepest decline in at least 73 years.
Even still, it likely will leave U.S. output some 4% below
its level in the fourth quarter of 2019, a fact Trump's
challenger, Democrat Joe Biden, is almost certain to highlight
along with signs that the growth spurt is fast petering out.
"The figure for estimated GDP growth in the third quarter
will be dramatic, and will have absolutely zero effect on the
election," said Christopher Way, associate professor of
government at Cornell University. "It is economic performance in
the first half of an election year that matters. For people who
are still out of work or struggling with dwindling savings after
the stimulus wears off, it will have little impact."
Gross domestic product probably rebounded at a 31%
annualized rate last quarter, according to a Reuters survey of
economists. That would be the fastest pace since the government
started keeping records in 1947 and follow a historic 31.4% rate
of decline in the second quarter.
The expected surge in GDP growth would recoup a little over
half of the 10.6% plunge in output in the first half of the
year. By comparison, the economy contracted 4% peak to trough
during the 2007-09 Great Recession.
The rescue package provided a lifeline for many businesses
and the unemployed, juicing up consumer spending, which on its
own is estimated to have made up about 80% of the jump in GDP.
But government funding has been depleted with no deal for
another round of relief in sight, and new COVID-19 cases are
spiraling across the country, forcing restrictions on businesses
like restaurants and bars. Just over half of the 22.2 million
jobs lost during the pandemic have been recouped, and layoffs
persist. The economy plunged into recession in February.
A separate report from the Labor Department on Thursday is
likely to show 775,000 people filed for state unemployment
benefits last week, according to a Reuters survey. Though claims
have dropped from a record 6.867 million in March, they remain
above their 665,000 peak during the Great Recession.
About 23.2 million Americans were receiving unemployment
benefits in early October, though many have exhausted their
eligibility for state aid. Another fiscal package is expected
after the election or early next year.
"There is still a long way to go before we get back to where
we were before the pandemic, probably the end of 2021," said Gus
Faucher, chief economist at PNC Financial in Pittsburgh,
Pennsylvania. "That assumes we get additional stimulus. Growth
will slow through 2021 and the recovery will get more difficult
as some structural issues with the economy persist."
Growth estimates for the fourth quarter are below a 5% rate.
Consumer spending, which accounts for more than two-thirds
of the U.S. economy, is expected to have rebounded at a rate of
about 39% in the third quarter, driven by purchases of goods
like motor vehicles and electronics.
Spending was boosted by billions of dollars in government
transfers, including a $600 weekly unemployment subsidy and a
one-off $1,200 check to households. But spending on services
likely remained weak, which would leave consumer spending at
least 3.5% below its fourth quarter level. Services like airline
travel remain depressed.
"We cannot understate the importance of the government
support for household incomes," said James Knightley chief
international economist at ING in New York. "The $1,200 checks
and the expansion of unemployment benefits meant nearly 70% of
recipients received higher incomes than when they were actually
The shift toward goods spending pulled in imports, likely
resulting in a widening of the trade deficit. Some of the
imports, however, ended up in warehouses. The accumulation of
inventory likely offset the trade hit to GDP growth.
Though a turnaround is expected in business investment after
the second-quarter drubbing, economists believe the bounce would
be temporary as demand for goods that do not compliment
life-style changes brought by COVID-19 remains weak. The
pandemic has also crushed oil prices, weighing on spending on
nonresidential structures like gas and oil well drilling.
Boeing Co reported its fourth straight quarterly loss
on Wednesday and announced it now expected to eliminate some
30,000 jobs through buyouts, layoffs and attrition - nearly
double what it initially planned - for a global workforce of
around 130,000 by end-2021.
The housing market was likely another star performer, thanks
to historic low interest rates. But government spending was
probably a drag as transfers largely happened in the second
quarter. Government spending was also likely pressured by cuts
at state and local governments, whose finances have been
squeezed by the coronavirus.
(Reporting by Lucia Mutikani;
Editing by Dan Burns)