The U.S. had its first peak at overall Gross Domestic Product (GDP) for 2020, and it’s not pretty, dropping 3.5 percent on an inflation-adjusted basis for the entire year following massive losses from the Covid pandemic-led lockdowns.
That is even worse than 2008 and 2009, when the economy contracted 0.1 percent and 2.5 percent, respectively, as 8 million jobs were lost before labor markets bottomed in Dec. 2009.
In 2020, the Covid recession took away 25 million jobs at its peak when labor markets bottomed in April, with more than 16 million jobs recovered since then under the former Trump administration. Still, that leaves about 9 million jobs still to be recovered — if they are ever recovered.
Meaning there is still a ways to go and a lot of room for growth for the new President Joe Biden — provided he finds a way to reopen the rest of the economy.
Looking back at the ten recessions that have occurred since 1948, it took on average 11 months for all the job losses to be realized to get to the labor market bottom, and another 16 months to recover. The entire ordeal lasts on average 27 months.
The worst by far was the Great Recession, which from peak employment in Nov. 2007 to the bottom in Dec. 2009, saw 8.3 million jobs lost and the U.S. economy did not get them back until in Sept. 2014. The whole process took almost seven years, including almost 5 years to get all the jobs back once the bottom was reached.
So, how long will it take to get back the jobs lost to Covid?
That’s anyone’s guess, but critical factors will probably include how quickly and effective the vaccine is administered. Does it work? Or does Covid come back in September when the next cold and flu season begins? When does the country reach herd immunity?
Confirmed Covid cases is still coming in at about 159,000 daily, while probable cases is projected by the Institute for Health Metrics and Evaluation to be about 286,000 a day. The peak is said to have been around Dec. 23 at about 340,000 cases a day.
And to answer the question about the efficacy of the vaccine, we may not know until next fall if not later how good it was. Are cases declining now because the vaccine is working? Because the peak of the cold and flu season was reached? Both?
Next, do the schools reopen? Women have been disproportionately removed from the labor force in the Covid recession, with females having the lowest labor participation now than at any time since 1987. Schools remaining closed in many states undoubtedly accounts for a portion of that, as parents have to stay home while their children are distance learning or day care is cancelled.
On that count, a new 200-page report on Covid response from the Biden administration states, “In the coming weeks, FEMA, in consultation with ED and CDC, will work with states and local governments to utilize disaster relief funds to address barriers to school reopening, including purchase of masks and sanitizing products, as well as necessary emergency changes to school ventilation.” Essentially, the Biden administration is proposing to retrofit 130,000 schools across the country. That could take a while.
Another, troubling sign is that of the 9 million jobs still missing from the pandemic, 5.4 million of those who lost their jobs left the labor force altogether. The longer they stay out of the labor force without prospects to return, and the longer unemployment and other benefits are extended, the more likely they stay out of the labor force for many years to come.
Again, it took the Obama-Biden economy last time almost five years to recover all the jobs that were lost in the financial crisis. 2021 will be the year that tells us the robust recovery that began in 2020 under former President Trump will continue under President Biden, with millions of jobs created this spring and summer. Or, if we’re in for another lost decade. Stay tuned.
Robert Romano is the Vice President of Public Policy at Americans for Limited Government.
Cross-posted with The Daily Torch
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