{"id":11103,"date":"2021-05-14T08:01:38","date_gmt":"2021-05-14T13:01:38","guid":{"rendered":"http:\/\/blog.uwsp.edu\/cps\/?p=11103"},"modified":"2021-05-14T09:01:29","modified_gmt":"2021-05-14T14:01:29","slug":"the-economy-where-weve-been-and-where-were-going","status":"publish","type":"post","link":"https:\/\/blog.uwsp.edu\/cps\/2021\/05\/14\/the-economy-where-weve-been-and-where-were-going\/","title":{"rendered":"The Economy \u2013 Where We\u2019ve Been and Where We\u2019re Going"},"content":{"rendered":"\n

This article was originally a part of the Center for Business and Economic Insight Spring 2021 Presentation<\/a>.<\/em><\/strong><\/p><\/blockquote>\n\n\n\n

\"The<\/figure>\n\n\n\n

The United States is emerging from one of the most challenging and unique economic periods in its history. This challenging economic period was different from others. The economic downturn wasn\u2019t the result of financial market problems or other economic imbalances; it was due to a pandemic. Over a half million Americans lost their lives to COVID-19. Like other economic crises, if there is a problem, the problem needs to be fixed before the economy can return to its normal growth. Hopefully, the significant ramp-up in vaccinations that has occurred will make the virus a bad memory by the end of 2021.<\/p>\n\n\n\n

This report will provide a summary of what\u2019s been going on with the economy and financial markets as well as look forward to the challenges facing the United States beyond COVID-19.<\/p>\n\n\n\n

Where We\u2019ve Been<\/strong><\/h3>\n\n\n\n

Economic Growth<\/em><\/h4>\n\n\n\n

The decline in economic growth in\n2020 ranks as the fifth worst annual decline in GDP since the Great Depression.\nGDP declined -3.5% in 2020; this compares to a drop of -2.5% in 2009 during the\nfinancial crisis. The Great Depression accounts for three of the worst years\nfor economic declines, with 1932 as the worst year with a -12.9% drop in GDP. The\neconomic contraction following World War II accounted for the second worst\ndecline, with a GDP decrease of -11.6% in 1946.<\/p>\n\n\n\n

Worst Declines in Annual U.S. GDP (Source:\nBureau of Economic Analysis<\/em>)<\/p>\n\n\n\n

  1. 1932<\/strong> -12.9%<\/li>
  2. 1946<\/strong> -11.6%<\/li>
  3. 1930<\/strong> -8.5%<\/li>
  4. 1931<\/strong> -6.4%<\/li>
  5. 2020<\/strong> -3.5%<\/li>
  6. 2009<\/strong> -2.5%<\/li><\/ol>\n\n\n\n

    After a temporary kick-up in economic growth in 2018\ndue to the tax cuts, the economy began slowing in 2019. When compared to\neconomic growth of the previous year, every quarter in 2019 had lower economic\ngrowth than the corresponding quarter of the previous year.<\/p>\n\n\n\n

    \"Percent<\/figure>\n\n\n\n

    That trend continued in 2020 but was greatly exacerbated by COVID-19. Quarterly growth was less in every quarter in 2020 relative to the prior year, with pandemic driven economic declines beginning in the second quarter. When comparing economic growth to the previous quarter of a year ago, the 2020 second quarter decline of -9.0% was the worst on record since the Bureau of Economic Analysis<\/em> began tracking quarterly growth in 1947. Although the economy improved in the second half of 2020, third quarter and fourth quarter GDP still declined from the prior year, though the rates of decline fell. <\/p>\n\n\n\n

    Employment<\/em><\/h4>\n\n\n\n

    The chart below presents the magnitude of the drop in employment that occurred in 2020 due to COVID-19 and the subsequent recovery. The drop in employment was much greater than what occurred during the financial crisis. Prior to the financial crisis, nonfarm employment peaked at 138.4 million in January 2008 before bottoming out at 129.7 million in February 2010. The decline in jobs lasted slightly over two years with a loss of approximately 8.7 million jobs. <\/p>\n\n\n\n

    Following the financial crisis, employment\ngrew steadily and consistently from 129.7 million in February 2010 to 152.5\nmillion in February 2020. The employment growth lasted 10 years with\napproximately 22.8 million jobs added to the economy.<\/p>\n\n\n\n

    During the financial crisis, employment bottomed out at 129.7 million. The onslaught of COVID-19 caused employment to drop to almost the same level in early 2020. The difference between the two downturns was the speed and magnitude of the declines. During the financial crisis, 8.7 million<\/em> jobs were lost over two years<\/em>. During COVID-19, 22.3 million<\/em> jobs were lost over two months<\/em>. Prior to the effects of COVID-19 on the economy, employment peaked at 152.5 million in February 2020. Two months later, employment dropped to 130.2 million. By April 2020 employment had declined by approximately 22.3 million. Employment gradually recovered beginning in May 2020, reaching 144 million in March 2021. Despite the increase of approximately 14 million jobs since April 2020, the March 2021 employment was still over 8 million fewer jobs than the employment peak in February 2020. The chart below shows the roller coaster for employment from January 2020 through March 2021.<\/p>\n\n\n\n

    All Employees, nonfarm Payrolls (seasonally adjusted)<\/strong><\/p>\n\n\n\n

    \"\"
    Source: Bureau of Labor Statistics<\/em><\/figcaption><\/figure>\n\n\n\n

    Poverty<\/em><\/h4>\n\n\n\n

    An incredibly unfortunate side effect of COVID-19 was the dramatic impact the economic decline had on poverty rates in the United States, particularly among Black and Latino individuals, where poverty rates were already disproportionately high.<\/p>\n\n\n\n

    The U.S. Census Bureau uses a set of income\nthresholds that vary by family size and age of family members to determine who\nis in poverty. The thresholds are updated annually for inflation and apply\nthroughout the United States. Selected 2020 Poverty Thresholds by age and\nfamily size are listed in the table below.<\/p>\n\n\n\n

    Selected 2020 Poverty Thresholds by Age and Family size<\/strong>
    Source: U.S. Census Bureau<\/em><\/p>\n\n\n\n
    \n One\n Person Under Age 65\n <\/td>\n $13,465\n <\/td><\/tr>
    \n One Person Aged 65 and Older\n <\/td>\n $12,413\n <\/td><\/tr>
    \n Two Person Household Under Age 65\n <\/td>\n $17,331\n <\/td><\/tr>
    \n Two Person Household Aged 65 and Older\n <\/td>\n $15,644\n <\/td><\/tr>
    \n Family of Three \u2013 1 Child\n <\/td>\n $20,832\n <\/td><\/tr>
    \n Family of Four \u2013 2 Children\n <\/td>\n $26,246\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

    The impact on COVID-19 on poverty in the U.S. was swift and devastating. According to research by the Center on Budget and Policy Priorities<\/em>, from February to June 2020:<\/p>\n\n\n\n