Five things everyone should know about . . . The Economic Impacts of COVID-19
1. In a single month, the COVID-19 pandemic erased more than a decade’s-worth of new jobs. During the Great Recession (2007-09), Wisconsin’s employment level fell to a low of 2.8 million jobs, according to data from the U.S. Bureau of Labor Statistics. This was followed by a period of steady job growth. From January 2010 to January 2020, Wisconsin added close to 203,000 new jobs, reaching a total of just over 3 million. But state residents made significant changes to their spending habits as they adapted to new guidelines and mandates at the onset of the pandemic. From March 2020 to April 2020, this contributed to a loss of nearly 360,000 jobs, which more than eliminated all of the state’s post-Great Recession gains. While some jobs have returned since then, the most recent data (from June 2020) indicate that employment levels in the state are still comparable to those of December 2009, the depth of the Great Recession.
2. Business owners of color are especially vulnerable to the economic effects of COVID-19. Some of the most heavily impacted sectors, as measured by unemployment claims, are retail, arts, accommodation and food services, and “other services,” a catchall category that includes pet care, equipment repair, and laundry and dry cleaning, among others. According to the U.S. Census, people of color are more likely than white proprietors to own businesses in these sectors. More than half (54%) of Black- or African American-owned businesses are included in the above categories, as compared to only about one-third (32%) of white-owned businesses. A significant proportion of Asian-owned businesses (49%), American Indian-owned businesses (35%), and Hispanic-owned businesses (36%) are also included in the most vulnerable sectors.
3. The pandemic has sharpened existing disparities in broadband internet access. In response to continued efforts to reduce the spread of COVID-19, far more people are working, schooling, and entertaining themselves at home. High-speed internet has become even more important. However, recent data from the UW Division of Extension indicates that more than one-third of households in rural Wisconsin counties do not have broadband access. This service gap makes remote work, virtual education, telehealth, and home entertainment much more difficult for state residents in nonmetropolitan areas.
4. The economic impacts of the current pandemic are likely to look very different than the fallout of the country’s last major pandemic, and that’s largely due to policy. This is the nineteenth recession since the flu pandemic of 1918, and the federal response to economic downturns has changed dramatically since then. The Federal Reserve Bank was just five years old in 1918 and had not yet taken an active role in stabilizing downturns. Great Depression era-policies that promoted large government spending (fiscal stimulus) to offset declines in consumer spending had not yet gained traction. And Wisconsin, the first state to pass unemployment insurance into law, didn’t do so until 1932. Today, a breadth of policies has already been deployed. If they work as intended, they will mitigate the negative economic effects of the pandemic and aid a speedy recovery.
5. The initial federal response to COVID-19 included the largest fiscal stimulus in U.S. history. Fiscal stimulus has been a common response to economic downturns since the 1930s. In response to the pandemic-induced recession, Congress passed three fiscal stimulus bills to spur demand and stabilize the declining economy. At $2.2 trillion, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 is the largest U.S. fiscal stimulus ever passed. A recent study from the Massachusetts Institute of Technology shows that the Paycheck Protection Program, a part of the CARES Act meant to reduce employment loss through relief to businesses, saved between 1.4 million and 3.2 million jobs.
Tessa Conroy is an economic development specialist and assistant professor with the UW–Madison Division of Extension. She teaches courses in the Department of Agricultural and Applied Economics at CALS.This article was posted in Economic and Community Development, Fall 2020, Five Things, Front List and tagged agricultural and applied economics, broadband internet, CARES Act, COVID-19, Economy, Extension, fiscal stimulus, pandemic, Tessa Conroy.