The Likely Impact of COVID-19 on US Employment in the Medium Term

Abstract

COVID-19 caused an abrupt increase in unemployment rates for people across various fields of work. This paper compares the COVID-19 crisis with the Great Recession and the Spanish Influenza. After careful data collection and analysis, it is clear that COVID-19 caused a steep, immediate decline in the economy although it did not last long. By comparison, the Global Financial Crisis was a persistent recession though less severe. Comparison of the health effects for COVID-19 and the Spanish flu reveals that the influenza was much more contagious as it infected 29.3% of the US population in three years. In contrast, this percent is 2.4% for COVID-19 as of August, 2021. The flu outbreak also coincided with WWI which caused further spread of the virus, and an effective vaccine was never developed. Therefore, the current economic decline should not be worse than that of the influenza. Moreover, the government is more actively participating in the economy now than it was during the flu pandemic. The Spanish flu had a V-shaped economic trend despite having minimal government involvement. Because the flu and coronavirus are both pandemic-induced crises, we would expect COVID-19 to be V-shaped as well, which is seen through the graphs below. U.S. data from the Federal Reserve is analyzed graphically in this paper, and it shows that the COVID-19 crisis exhibits a distinct V-shape pattern. This suggests that economic recovery will be faster than the less severe Global Financial Crisis, and that countercyclical government policies may not be as necessary.