The Economy: Where We’ve Been and Where We’re Going
Kevin M. Bahr CBEI Chief Analyst; Professor of Business School of Business and Economics
The United States is emerging from one of the most challenging and unique economic periods in its history. This challenging economic period was different from others. The economic downturn wasn’t the result of financial market problems or other economic imbalances; it was due to a pandemic. Over a half million Americans lost their lives to COVID-19. Like other economic crises, if there is a problem, the problem needs to be fixed before the economy can return to its normal growth. Hopefully, the significant ramp-up in vaccinations that has occurred will make the virus a bad memory by the end of 2021. This report will provide a summary of what’s been going on with the economy and financial markets as well as look forward to the challenges facing the United States beyond COVID-19. Where We’ve Been Economic Growth The decline in economic growth in 2020 ranks as the fifth worst annual decline in GDP since the Great Depression. GDP declined -3.5% in 2020; this compares to a drop of -2.5% in 2009 during the financial crisis. The Great Depression accounts for three of the worst years for economic declines, with 1932 as the worst year with a -12.9% drop in GDP. The economic contraction following World War II accounted for the second worst decline, with a GDP decrease of -11.6% in 1946. After a temporary kick-up in economic growth in 2018 due to the tax cuts, the economy began slowing in 2019. When compared to economic growth of the previous year, every quarter in 2019 had lower economic growth than the corresponding quarter of the previous year.
Percent Change from Quarter One Year Ago - Real GDP (Source: Bureau of Economic Analysis) Q1 Q2 Q3
Q4 2.5 2.3
2018 2019 2020
3.1 2.3 0.3
3.3 2.0
3.1 2.1
-9.0
-2.8
-2.4
That trend continued in 2020 but was greatly exacerbated by COVID-19. Quarterly growth was less in every quarter in 2020 relative to the prior year, with pandemic driven economic declines beginning in the second quarter. When comparing economic growth to the previous quarter of a year ago, the 2020 second quarter decline of -9.0% was the worst on record since the Bureau of Economic Analysis began tracking quarterly growth in 1947. Although the economy improved in the second half of 2020, third quarter and fourth quarter GDP still declined from the prior year, though the rates of decline fell.
Central Wisconsin Report - Fall 2020
1
Made with FlippingBook Learn more on our blog