Economic analysis: look back at 2020

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The economy has had a wild ride in 2020. It is worth looking back on a year that will certainly be one for the books of economic history.

It’s easy to forget, considering everything that has happened since, that the economy was healthy at the start of 2020. Economic growth was tracking around 2% even until the end of March. The labor market added 214,000 jobs in January and 251,000 in February. These are big numbers considering that we were almost 11 full years into an economic expansion that began in June 2009 – the end of the financial crisis. Without the COVID-19 virus, the economy would have continued to grow. As it stands, at nearly 11 years, the late expansion is the longest in the post-WWII era.

The two main factors slowing economic growth in February were Boeing’s problems with the 737 MAX and the little-understood virus raging in Wuhan, China. Boeing’s troubles and the virus that would plague the rest of the world were slashing a small fraction of growth. At the time, the impact of the virus was due to transportation and supply chain disruptions. Forecasters have widely assumed that the lost growth would be caught up in the second quarter as China reopens and Boeing relaunches production of the MAX.

Once COVID-19 reached our shores, it plunged the economy into a spin from which it has not yet fully recovered. The virus forced us to “La Grande Pause” from mid-March to June. The Great Pause was the suspension of normal economic activity for families and businesses. Government mandates, such as stay-at-home orders and forced business closures, and the reluctance of the general public to engage in their normal activities have led to the hiatus.

After growing nearly 2% at the end of March, the economy fell rapidly. In March and April, more than 22.1 million Americans lost their jobs. Just two weeks of suspension of economic activity (from mid-March to the end of the month) was enough to cause the economy to contract 5% in the first quarter. The continuation of this suspension in April, May and June caused the economy to contract by more than 31% in the second quarter.

The 31% drop is a record we hope to never beat. The previous quarterly contraction record was 10% – a mark the COVID economy has eclipsed by three. Not surprisingly, this contraction was caused by the influenza pandemic that year.

The economy has rebounded strongly thanks to a combination of lower case rates, the end of government-mandated shutdowns, and people’s willingness to get more back to their normal routine. It increased by more than 33% in the third quarter. This is testament to the incredible resilience of the US economy.

Although this growth was higher than the increase from the contraction in the previous quarter, the economy was still nearly $ 700 billion lower at the end of the third quarter compared to the end of 2019. It is still lower. over $ 400 billion now. It won’t return to its pre-pandemic size until later this year – hopefully in the second quarter.

The recovery has been uneven. Some industries have more than recovered, especially those whose products are in higher demand during a pandemic – technology for example. Others who cannot fully function, or not at all, in a socially distant way, such as restaurants, bars, travel, tourism, accommodation and events, continue to struggle. This fractional recovery is known as a “K-shaped” recovery. Those who have recovered are at the top of the “K” and those who have not recovered are at the bottom.

From the start of the pandemic in March until the end of the year, we chronicled what was happening in the economy with frequent posts on the latest economic data. Most of these posts included graphics. Below you can see a compilation of some of the most interesting.

Looking at the charts you will see how far the economy has grown. Keep in mind that the outlook for 2021 is good as the pandemic will end this year. Vaccines will reduce cases and allow businesses at the bottom of the “K” to finally begin to recover.

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