U.S. Economy has Recovered 70% of Recession Loss
Peter Bernstein, Vice President
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RCF’s October Recovery Scorecard shows the economy has recovered 70% of its recession loss, a small improvement over the 67% recovery recorded in our September scorecard. [Note that since economic data are released with a lag, the October report includes data released in August and September.] Real income less transfers and wages and salaries experienced the largest improvements from the prior month but remain well below their February peaks. The labor force declined, however, indicating that many who have lost their jobs are not actively seeking employment, and thus not counted in the official unemployment measure. In many cases, these “leavers” are women who are caring for children who cannot attend in-person school or daycare, evidence that the effects of the pandemic continue to hold back economic activity.
Notes and methodology: All data are seasonally adjusted monthly values. For economic variables #1, 2, 3, 11, 12, 14, 15, 16, August 2020 is the latest data available. For economic variables #4, 5, 6, 7, 8, 9, 10, 13, September 2020 is the latest data available. Example calculation for economic variable #1, real income less government transfers fell 8.4% from its February value to its low point in April. In the latest available report (August), the variable was 4.2% below its February value. Therefore, it has recovered 50% of the loss. Data Sources: #1, 2, 3, 12, 13: Bureau of Economic Analysis; #4, 5, 6, 7, 8: Bureau of Labor Statistics; #9: U.S. Employment and Training Administration; #10: Federal Reserve; #11: Bureau of the Census; #14, 15: Bureau of the Census and U.S. Department of Housing and Urban Development, #16: National Association of Realtors.
To V or not to V
When many parts of the economy closed-down in response to the Covid-19 pandemic, there was some hope that the economy would rebound quickly and strongly once those restrictions were removed. This so-called V-shaped recovery seemed possible for a time and was reflected in our earlier recovery scorecards. For example, our August scored showed that the economy had recovered just 45% of the recession loss; the September scorecard showed a 67% recovery.
But clearly the recovery has slowed as seen by the small improvement shown in our October scored. While the overall recovery percentage is a result of our 16 different economic measures, the path of the recovery can be seen in the employment data.
From April to June the economy recovered 7.5 million of the 22.2 million jobs lost during the early months of the recession. At that pace, employment would have fully recovered by October. Instead, the pace of the recovery slowed considerably, with only 3.9 million jobs added on net from June to September. At this pace, it would take until April of next year for employment to return to its previous pace. And at the slower pace of job growth in September (0.6 million increase) we would not see a full employment recovery until early 2022.
It now looks like a V-shaped employment recovery is off the table, and slower employment growth will also constrain recoveries in incomes and consumer spending. An appendix shows the recent recovery scorecards, further illustrating the recent slowdown in the economy’s rebound.
Appendix – Recent History of Recovery Scorecard