The Pandemic Recession: A Tale of Mixed Success

Strategic Insights -

As the coronavirus pandemic ravaged the US economy a year ago, many feared a repeat of the last recession, with its years of high unemployment and anemic wage growth. However, the federal government responded with unprecedented force and speed, launching a multitrillion-dollar aid package to expand unemployment benefits, rescue small businesses, and send checks to most American households. The Federal Reserve also acted swiftly, deploying emergency tools to safeguard the financial system. The result is an economy far stronger than expected, with the unemployment rate falling to 6.2 percent and consumer spending nearing its pre-pandemic level.

Key Takeaways:

  • The federal government's response to the pandemic recession was swift and forceful, with a multitrillion-dollar aid package launched within weeks of the virus hitting American shores.
  • The Federal Reserve deployed emergency tools to safeguard the financial system, preventing a worse outcome.
  • Despite the successes, many low-income families, Black and brown families, and those without resources were disproportionately affected, with lasting financial consequences.
  • The unemployment insurance system was overwhelmed, with only 41 percent of unemployed workers having access to benefits as of February 17, 2021.
  • The Paycheck Protection Program helped hundreds of thousands of small businesses but was plagued by administrative hiccups and saved relatively few jobs.
  • Direct checks to households helped keep families afloat but sent billions of dollars to households that were already financially stable.

Statistics:

  • 9.5 million fewer jobs in February 2021 compared to a year earlier, a hole deeper than in the worst of the last recession.
  • Gross domestic product fell 3.5 percent in 2020, making it among the worst years on record.
  • 6.2 percent unemployment rate as of February 2021, down from nearly 15 percent in April.
  • 41 percent of unemployed workers had access to benefits as of February 17, 2021.
  • $900 billion in aid passed in late December 2020 to prevent millions of people from losing unemployment benefits.
  • $1.9 trillion plan passed in March 2021 to support the economy and address remaining inequities.

Sources:

  • THE NEW YORK TIMES, "The Pandemic Recession: A Tale of Mixed Success"
  • Eliza Forsythe, University of Illinois economist, study on access to unemployment benefits
  • Rebecca Dixon, National Employment Law Project, worker advocacy group
  • Michael R. Strain, American Enterprise Institute, economist
  • Wendy Edelberg, Hamilton Project, director
  • Goldman Sachs economists, unemployment rate predictions
  • Obama administration Treasury Department official Karen Dynan, Harvard economist