Tag: COVID-19 Recession

The COVID-19 Recession (Real GDP)

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Which had a greater impact on U.S. real GDP?  Was it the COVID-19 Recession or the Great Recession?

In Q4 2019, the U.S. real GDP peaked. The new year (2020) started on a positive note with solid job growth in January and February. In March COVID-19 was declared a pandemic. Government leaders put lockdowns and restrictions in place that caused employment and real GDP to plummet.

The rate of change in real GDP for Q1 was -5.0%. The Q1 value was 98.7% of the Q4 2019 value.

The trough of the downturn occurred in Q2. The rate of change was -31.4%. The Q2 value was 89.9% of the Q4 2019 value.

In Q3, the number of lockdowns and restrictions was reduced and the recovery began. The change in the real GDP growth rate for Q3 was +33.4%. The Q3 value was 96.6% of the Q4 2019 value.

The rate of growth tapered off in Q4 because there was a resurgence in the virus and some government leaders restored lockdowns and other restrictions. The change in the real GDP growth rate for Q4 was 4.0%. The Q4 value was 97.5% of the Q4 2019 value.

The path of the real GDP value was V-shaped during 2020. It will more closely resemble a checkmark when 2020 and 2021 are combined. The value of real GDP will return to the Q4 2019 level in Q4 2021.

In 2021 real GDP growth will be driven by stimulus funding, which will increase employment and spending. There will be stronger growth in the second half of the year.

Overall, there were be two quarters when the value of real GDP declined and six quarters where it recovered to reach the Q4 2019 value. The total time of the decline and recovery is eight quarters or two-years.

A look at the Great Recession shows real GDP peaked in Q2 2008 and it declined for four quarters. Real GDP increased from Q2 2009 to Q2 2011 (eight quarters), until it returned to the Q2 2008 peak. The overall time of the decline and recovery was 12 quarters or 36 months.

The Great Recession was more shallow; however, the COVID-19 Recession recovered more quickly.

The COVID-19 Recession (Employment)

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It has been almost a year since the COVID-19 recession hit the U.S.

In February 2020, U.S. employment peaked.  In March, WHO declared the COVID-19 virus a pandemic. Government leaders put lockdowns in place that caused employment to decline in March and April. At the trough of the decline, in April, U.S. employment was 85.3% of the February 2020 total. Said differently, in March and April, the U.S. economy lost 22.3 million employees.

By the end of 2020, U.S. employment was 93.48% of the February 2020 total. Only 49,000 jobs were added in January 2021. Employment edged up a notch and was 93.51% of the February 2020 total. On a positive note, January employment had increased by 12.4 million jobs.

Through the first part of the summer, the employment recovery was V-shaped. As net job creation tapered off, it has turned into a checkmark shaped recovery.

U.S. Employment

The Great Recession was much different than the COVID-19 Recession. A shock to the financial system caused the Great Recession. On the other hand, the U.S. financial system was in good shape when policies related to the COVID-19 medical crisis triggered the current recession.

U.S. employment peaked in January 2008. As the financial crisis snowballed, U.S. employment declined for 25 months. This declined was longer than the COVID-19 recession, but not as deep.

At the trough in 2010, U.S. employment was 93.7% of the January 2008 total. It took 51 months of job recovery to return to the January 2008 level. The combined length of the employment decline and recovery was 76 months.

The recovery from the COVID-19 recession will be in Q4 of 2022 or Q1 of 2023. The estimated time of recovery from the trough will be 2.5 to 3.0 years. The total estimated time of recovery from the previous peak is approximately 31 to 37 months.

There are many potential headwinds. Keep your fingers crossed.