Did covid-19 cause a recession in the U.S.?

In the week of March 21st, millions of American were applying for unemployment. Simultaneously, the rate of job loss in the U.S. exceeded job loss during the worst weeks of the Great Recession. This comes after the longest economic expansion on record came to a halt with the global spread of covid-19. So, has the covid-19 pandemic caused a recession in the U.S. economy? Can the economy snap back in the fourth quarter?

The United States is currently facing one of the largest shocks to our economy outside of wartime. With the current spread of covid-19 making second waves around the world, demand has been severely reduced in the world economy. This loss in demand complicates supply chains causing a drop in equity prices, and inevitably, dropping household wealth. While the third quarter showed that the U.S. economy grew at the fastest rate ever recorded, economic activity is lower than pre-pandemic levels. This is leaving experts concerned that the upturn of the third quarter may be a false positive, no pun intended.

Let’s look at the numbers to get a better idea of how covid-19 has effected the U.S. economy:

  • Third quarter GDP has increased at an annualized rate of 33.1% following a 31.4% decrease in the second quarter
  • Investment in equipment like computers and related materials has increased by 70.1%
  • You may find this surprising, but international trade, specifically the export of goods, has increased by 104.5%
  • Exports of services has decreased by 0.06%
  • While the third quarter may have shown an increase, it is still 5-6% below where it should be
  • Despite the end of stimulus, U.S. consumers are still spending. The rate of disposable income was increased by 0.07% in the month of September
  • Overall consumer spending has increased by 40.75, specifically- 38.4% increase on spending on services, business investment increase at a rate of 20.3%
  • Decrease of 14.6% in investment of structures. This makes sense considering the trend of remote work, school, shopping, and entertainment. This is bound to cause less investment in office buildings, stores, etc.

Some final notes:

While our third quarter was impressive for being in the midst of a pandemic, there is a lot more growth needed for our economy to make a comeback. One plus is the historically low mortgage rates make now the perfect time to buy a home. Also, due to the influx of stimulus to most U.S. citizens, we saw an increase in personal, wage, and business income in the month of September. How the fourth quarter for our economy pans out will entirely depend on the path of the virus, so, remember to do your part, wear your mask, and follow CDC guidelines!