GENERAL ECONOMIC CONDITIONS
For the 10 years leading up to the current pandemic, the U.S. economy had enjoyed a period of steady growth following the Great Recession. While GDP growth was not as strong as in the 1990’s or even the four years immediately before the last downturn, the GDP grew at an average compound annual rate of 2.3 percent. At the same time, the unemployment rate fell by well over six points and reached a level that had been considered below effective “full” employment given the limitations in the measurement method. Despite the economic growth, the inflation rate had been held in check, averaging 1.8 percent on a compound annual basis for the 10-year period. According to the Bureau of Economic Analysis, U.S. Gross Output increased at an average compound annual rate of approximately 4.1 percent from 2010 through 2019, adding over $11 trillion to the economy. Every major industry sector in the U.S. economy increased over that period to some degree, as shown in the graph on the following page. The two fastest growing sectors were Construction and Accommodations/Food Services. However, they were followed closely by the growth rate for the single largest sector in the economy, Finance/Insurance/Real Estate. While output growth was only 3.3 percent in 2019, down from 6.1 percent in 2018 and below the nine-year average, the economy continued to demonstrate overall stability and growth potential. Even the first two months of 2020 as awareness of COVID-19 was spreading but its effects in the U.S. had yet to be understood, the unemployment rate continued at the lowest level seen since the late 1960’s. Then, in March, the wheels came off. Although the timing of the massive wave of shutdowns and stay-at-home orders came late enough to hold unemployment to only 4.4 percent for the month, the sudden and massive suspension of economic activity resulted in a drop in first quarter GDP of 4.8 percent. That drop was nearly twice the annual decline experienced in 2009 during the Great Recession and had not been surpassed since 1946 in the wind-down from war production after World War II. The number of first-time jobless claims soared to five times the previous one-week record, then doubled again the following week and has continued to number in the millions each week since. In the wake of massive economic disruptions, governments have scrambled to provide economic stimuli and otherwise soften the sudden sharp blow. As already noted, however, there are limits to the effectiveness of any stimulus in the practical absence of markets within which to spend the money. In addition, no amount of government stimulus can full compensate for the loss in economic output caused by shutting down large sections of the economy. Indeed, the economic impacts have been felt across the board as even sectors not directly affected by restrictions nevertheless experience disruptions from the closures in the sectors that are.
∴ PROGNOSIS
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