The COVID-19 pandemic has disrupted American businesses and the economy unlike any economic downturn seen before. According to https://www.nytimes.com, the U.S. officially slipped into a recession in February of 2020. According to many economists, while the impact of the pandemic on the economy is substantial, the recession may be short-lived, as economic activity picks back up across states. Still, many believe that the recovery we face may be more difficult than anticipated and that all nations might be heading towards a depression.
Unemployment rate and The Great Depression
While measuring a depression is complicated, one of the more commonly accepted forms of analysis is looking at the unemployment rate. While a peak unemployment rate of 25.6% was recorded in May 1933 during the Great Depression, it reached 14.7% in April of 2020 (it has decreased to 10.2% since then). This improvement reflects efforts made by the government and individual industries to resume activity. Adam Veron explains that it is important to note that the unemployment rate has only exceeded 10% two times in recent history; once in December 1982, and once in October 2009.
Adam Veron on how calculating and interpreting figures can be complicated
If the rate of unemployment exceeds 20% and doesn’t improve for a few months, the country would likely enter into a depression. At that level of unemployment, around one out of every five Americans would be out of a job. Many economists think that depression may be lurking around the corner because the real rate of unemployment is higher than what is reported by officials. The Bureau of Labor Statistics has suggested that the real unemployment rate exceeds 16%; this discrepancy is a result of miscalculations in their survey that resulted in lowering the official rate. In April 2002, the BLS suggested that the unemployment rate was 19.7%.
There is a marked qualitative difference in the rate of unemployment now, versus the rate recorded during the Great Depression. This is because 73% of Americans that are currently laid off expect to return to their employment once businesses and industries open up. The biggest difference between the Great Depression and the current economic decline is that with the Great Depression, most of the jobs lost were lost permanently.
The present economic situation is different from standard economic downturns because economists believe that this situation has been ‘self-inflicted,’ out of necessity. Large sectors of the US economy have been forced to shut down as a result of regulations implemented by federal officials to curb the transmission rate of COVID-19. Experts firmly believe that the economy will rebound as soon as businesses start operating normally. Federal officials have come up with social policy measures in the meantime to make up for lost work, including improved unemployment benefits, lending programs for small businesses, and direct payments. So, even if the nation continues in this economic decline, it will rebound soon enough – as such, it is certainly not a typical recession or a depression.