Since the beginning of the COVID-19 pandemic last year, we have all experienced a lot of changes. From being locked down in our houses to being unable to do the activities we enjoy such as visiting friends, going to restaurants, visiting museums, or going on vacation. One of the most significant changes has been the downshifts in the economy. Because the economy is suffering, lots of people have been furloughed, laid off or fired. As people lost their income, consumption has dropped and consequently some businesses have had to shut down. In this Money Matters, we want to give you a better understanding of the economy changes and highlight some of the most significant changes.
One of the biggest changes the United States economy faced was its unemployment rate. Let’s remember that the unemployment rate indicates the percentage of people (ages 16 up to 65) who are not currently working in the total labor force.
It’s important to remember the lower the unemployment rate the better — anything 5% or less is considered great. As seen in the chart, before COVID-19 the unemployment rate went from around 3.5 at the beginning of March 2020 to almost 14.7 in April of 2020. This change in the graph represents millions of Americans who lost their job due to the pandemic. Among minorities, the impact was even sharper. The unemployment rate in April set a record of highs: 18.9% for Hispanic people, 16.7% for Black people, 14.5% for Asian people. and 14.2% for white people. Even higher were the unemployment rates for women. In every group, more women lost their jobs compared with men. The extreme unemployment has led to a significant decline in economic activity for more than a few months, which is typically called an economic recession. Because of the significant numbers pushed out of the work force because of the pandemic, people have called this economic downturn a “she-cession.”
In an 18-week period (March 21 – July 18), a total of 52.7 million people filed for unemployment insurance benefits. This rise in unemployment has no precedent, and it has been one of the worst in 150 years.
Compounding the problems that high unemployment poses was the change in the Gross Domestic Product or GDP. GDP, which is an important indicator of how good or bad a country is doing economically, fell during the second quarter of 2020 by 31.4%. The only other time the GDP fell so dramatically was in 1929 at the start of the Great Depression.
The U.S. economy is mainly driven by consumer spending. It accounts for 70% of our GDP. Since the pandemic left millions unemployed, many are concerned that consumption won’t increase fast enough to reactivate the economy to its pre-COVID-19 levels.
High unemployment and a severe fall in GDP both explain the current economic recession responsible for the struggle of so many families. These are not the only contributing factors to the current problems in the economy, but understand these factors are the first step to understanding what news, tv and media are talking about regarding economics.
A lot of hope for economic recovery is now pinned on vaccination. So far, the United States has vaccinated 40.1% of the population with at least one dose. About 26% of the population is fully vaccinated. According to the CDC, we will need 44% more of the population vaccinated in order to reach herd immunity. Once we reach herd immunity, things can open back up and hopefully offer economy stability for the country.
COVID-19 has shown us how public health concerns can have a serious impact on the economy. The government should make decisions thinking holistically and assessing what is going to have a greater positive impact on the population. Elected officials must make decisions that support women, especially women that belong to underrepresented populations, as they have been particularly struck by the pandemic. If our public policies hope to close the gaps that women from underrepresented populations are facing as a result of the pandemic, they must prioritize them when creating solutions for our economic recovery.
I look forward to meeting you back here next month with new economic topics to be discussed. If you have questions for me about economics, send an email to firstname.lastname@example.org and I’ll answer it!