The current coronavirus outbreak has led to an unprecedented event in American history: a mandated shutdown of most of the economy. While experts agree that such measures are necessary to halt the spread of the virus, the ramifications of the shutdown are severe. When the United States ends social distancing, it will have to contend with economic devastation unheard of in the post-war era. Though stock markets seem to be moving with some confidence due to aggressive actions by the Federal Reserve, the facts on the ground paint a far bleaker picture.
The headline numbers released over the past few weeks detail the current decline. The official unemployment rate in March was 4.4%, up from 3.7%, and correlating with 701,000 job losses, ending the 10 year streak of job growth. Since those numbers were calculated in mid-March, they are just the vanguard of the even bleaker employment situation in April and May. The updated weekly numbers show that 22 million workers have filed for unemployment since widespread shutdowns began one month ago, wiping out the near decade of job growth since the Great Recession. Various sources, from the St. Louis Fed on down, predict that the nation will reach around 30% unemployment at some point, which would surpass the 24.9% reached at the peak of the Great Depression. The economy as a whole could contract a full 30% in the next three months, alongside a 5% GDP drop for the year, even with expectations of a “v-shaped” rebound in economic activity. A recession, at this point, is a near-certainty.
Next to the macro numbers, various industries already in dire straits face near collapse from the virus. The oil industry, which by some measures employs 10 million Americans, and was already hammered by a glut of foreign oil, has been brought to its knees due to decreased demand. The goal of energy independence seems to be slipping further and further away. Manufacturing, touted by many as essential to ending this disease through the production of ventilators and masks, also contracted over the past month. Already facing competition from developing nations, stay-at-home orders are not helping President Trump’s election promise to revive the sector. Likewise, the retail industry, reeling from the rise of Amazon, could be forced to close 15,000 stores in this pandemic, destroying countless entry-level jobs. All of this erosion has sapped American paychecks, to the point where nearly 1 ⁄ 3 of renters did not make their monthly payment in the first week of April. Government checks and enhanced unemployment benefits have stemmed the tide to an extent, but these measures have cost trillions and must be periodically renewed. The economy is not just the numbers on the news every morning. More than the stock market, it makes up the livelihood of hundreds of millions of Americans. Considering that 50%-74% of Americans live paycheck to paycheck, with 3 in 10 having no savings, such a major disruption was bound to have a devastating impact on the working class. The coronavirus was the catalyst for these dominoes, but structural issues made such widespread devastation possible. And the trillions being added to the debt to prevent a depression will have to be paid back, one way or the other. The U.S. that will emerge from the crisis will have to reckon with the fact that for all the talk of it having the largest economy in the world, one event was enough to bring everything crashing down.