The improvements of the American economy are suddenly coming undone at the seams due to Covid-19. Prior to the pandemic, unemployment was at a 50-year low and inflation was below the Federal target of 2.0%. Covid-19 entered the scene, and hastily the Dow’s reached their biggest quarterly drops since 1987. The U.S economy had taken the hardest hit since the height of the Great Recession, with GDP contracted 4.8% in the first quarter alone. Economists came out with predictions that GDP would shrink 6.6%, having Americans were praying for V-shaped economic relief. However, it’s been roughly eight months since covid-19 hit the U.S, and economists are now re-accessing and talking about what the path to economic recovery may look like.
The U.S. economy is primarily driven by consumer spending, meaning that during phase one of social distancing; this resulted in businesses not being able to spend nor serve. Forcing many to close, in consequence, causing an aggregate demand doom-loop. Initially, preventative measures were taken by The Internal Revenue Service. Assuring people that they’d be aiding to implement a system in place for those in need at the time. The Federal Government pumped immense volumes of stimulus into the economy through the C.A.R.E Act. Priority government spending went towards business relief and single-income families. Forbes made the point of saying “while the American people questioned the efficiency, nonetheless, it was potent in preventing (what most were predicting) catastrophic results.”
According to the Department of Commerce, the U.S. economy advanced at a record-shattering pace of 33.1% in the third quarter. If the speed of economic growth from July-September stretched for the next 12 months, the U.S. economy will have increased by a third in size. Gracefully recovering the losses driven by coronavirus; according to data released by the Wall Street Journal, unemployment has fallen sharply since hitting a historic record of 14.7% in April. As of right now, the rate is at 7.9%, unfortunately, that number doesn’t compare to the 4.8% when Trump took office back in January 2017. Some economists are attempting to rejoice in this as a token of hope, and others not so much.
Tim Murtaugh, Trump’s 2020 Communications Director, released the following statement “this record economic growth is absolute validation of President Trump’s policies which creates jobs and opportunities for Americans in every corner of the country. The President built the world’s best economy once and he’s rapidly doing it again, proving that cutting taxes and reducing regulations and red tape clear the way for American ingenuity and our entrepreneurial spirit to thrive.”
Speaker of the House; Nancy Pelosi was not as impressed as she recently spoke to reporters in the Capitol saying “We have plenty of more work to do in the Joe Biden administration, we’ll be working between the White House and the Congress to get those jobs done, so we want to have as clean a slate as possible going into January.”
Regardless, economists say that the results of election night have little impact on markets. “The stock market is far more concerned with what party controls Congress, rather than the winner of the presidential race.” This is according to Financial Senior Market Strategist Ryan Detrick, historical data found that the stock market performed best when Congress was under split partisan between Republicans and Democrats.
While a rebounding GDP is great news for Americans, that still leaves millions of American citizens behind and trying to catch up. Permanent layoff has grown from 1.5 million in March to an immense 3.8 million in September. It will take some time before the average American can go back to pre-pandemic financial ways of living. The Daily Star is quoted saying, “The bad news is that the path to recovery is a long and grinding one. The good news is that the worst is perhaps behind us—if we are disciplined and diligent in our work.”