These 5 charts show how the coronavirus crisis has dwarfed the Great Recession in just 2 months


  • It’s been about two months since the US began sweeping lockdowns to contain the spread of coronavirus
  • The economic pain of the coronavirus-induced recession swiftly overtook that of the Great Recession in that short time as millions of Americans have lost jobs, businesses remain frozen, and consumer spending has taken a major hit. 
  • See below for five charts that show how the coronavirus-induced economic downturn compares to the Great Recession.
  • Visit Business Insider’s homepage for more stories.

It only took a few weeks for economists to agree that sweeping shutdowns to contain the spread of the novel coronavirus had plunged the US economy into a recession. 

Now, just two months since the first stay-at-home orders began, the ensuing downturn has surpassed the Great Recession that spanned 18 months between 2007 and 2009. 

“It just goes to show you how quickly the current crisis has evolved and how deep it is,” Daniel Zhao, an economist at Glassdoor, told Business Insider. The size and scope of the crisis is very unusual for any kind of quick disruption to the economy, he added. 

There has been an overwhelming amount of data showing the full scope of economic pain: millions of Americans have filed for unemployment insurance claims, millions of jobs have been erased, and consumer spending, retail sales, and production have plummeted by record amounts. 

The hit to the labor market has been particularly extreme amid shutdowns to contain COVID-19. It only took four weeks for the coronavirus downturn to erase all jobs created since 2009, and nine weeks for unemployment insurance claims to surpass the total filed during the Great Recession — an 18-month span.

In addition, the unemployment rate jumped in April from a 50-year low in February to the highest since the Great Depression of the 1920s and 1930s. And economists think it will be even higher in May’s nonfarm payroll report.

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Apples to Oranges

It makes sense to compare the coronavirus-induced downturn to the Great Recession, as it’s the most recent major economic event, Lindsey Piegza, chief economist at Stifel told Business Insider.

“No one really has the memory to think back to the eighties or the Great Depression,” said Piegza. “So really the comparison that the market’s going to be using is how bad is this relative to the financial crisis — that’s the paradigm that we live in.”

Still, there are some key differences between the coronavirus-induced downturn and the Great Recession. The US made the decision to shut of the economy to deal with a health event, unlike the Great Recession, which was caused by the financial crisis. 

“This current crisis is not due to something structurally wrong with the economy,” Zhao said. “It wasn’t caused by a housing bubble or financial crisis.” 

The optimistic case is thus that activity and demand should rebound once the economy is back open, according to Zhao.

“If businesses and workers can be helped through the public health crisis, then hopefully they would be able to resume normal economic activity quickly on the other side, and we could actually recover faster than we did after the Great Recession,” he said. 

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Ryan Sweet, a senior economist at Moody’s, said comparing the coronavirus pandemic to the Great Recession is “apples to oranges.” 

“I think this is more similar to a natural disaster,” Sweet told Business Insider. He sees similarities in the current hit to the labor force and what happened to workers following Hurricane Katrina, Hurricane Rita, and Superstorm Sandy. 

Some things are not identical to a natural disaster such as Hurricane Katrina, Sweet said. There hasn’t been massive destruction of capital stock such as homes and businesses, and thousands of people haven’t been physically displaced.

But in terms of the economy, “the labor force did fall sharply in New Orleans and Louisiana right after Hurricane Katrina and Rita,” he said. “So I would expect something similar.”

The many shapes of potential recovery 

Even though many states across the country have begun to reopen their economies from lockdowns, the US is still solidly in the period expected to show the depth of the impact from the pandemic. Economists forecast the sharpest drop in US gross domestic product in the second quarter, which spans April through June. 

Now, economists are watching incoming data for two things — signs that indicators have reached their worst levels, or that they are starting to rebound. 

The faster that the US economy does rebound will mean a shorter recession, classified by the National Bureau of Economic Research as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

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The bulk of the economic damage was expected to  hit in the second quarter, which spans the months April through June. Economists will continue to watch data as its released to get a full picture of the situation and to gauge what a potential recovery may look like. 

Even as states begin to reopen their economies, there’s a lot of uncertainty about the future. “I think it’s still way too early to say what the shape and speed of the recovery will look like,” said Zhao, adding that anyone who has assigned a letter shape to the recover is “overly confident.” 

He continued: “There are all kinds of things that could happen on the healthcare side, on the public health side, or on the policy side, that could all have enormous impacts on the economic recovery.” 

One thing that is key in any bets that economists and industry watchers do have about the potential recovery is the speed at which it might occur. While the rebound from the Great Recession was the longest on record, it was also very slow-moving. 

How fast the US recovers from the current crisis depends on how much stimulus is put into the economy by the government, according to Heidi Shierholz, senior economist at the Economic Policy Institute. 

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“That is a choice,” Shierholz said. “One of the things that made the recovery from the Great Recession so bad, so weak is that we state and local governments didn’t get the aid that they needed to not have to make substantial cuts that hamstrung the economy.”

Now, the federal government could keep the same thing from happening, according to Shierholz, by making sure people have benefits even though they aren’t working and helping businesses stay afloat even if they aren’t fully open. 

If the government does those things, “when the economy does reopen, there’ll be demand and confidence in the economy to get a quick bounce back,” said Shierholz.

Listed below are five key measures and accompanying charts showing that the coronavirus-induced US economic downturn is worse than the one that accompanied the Great Recession.

The last nine weeks have seen an unprecedented number of Americans filing for unemployment benefits.

In the single week ending on March 28, 2020, nearly 6.9 million Americans filed for unemployment. This was more than ten times higher than the single-week peak during the Great Recession of 665,000 initial claims in the week ending March 28, 2009.

“Even now, nine weeks into this, we’re still at the point where initial claims are more than three times the worst week of the great recession,” said Shierholz, adding that the scope of losses is a “mind-boggling difference.” 

In addition, many states have started reporting initial claims filed through Pandemic Unemployment Assistance, a new program that gives extended benefits to people that might not have been previously eligible such as gig workers or the self employed. 

The program is modeled after disaster unemployment insurance that goes out to specific areas hit by hurricanes or other natural disasters. In the week ending May 16, 2.2 million Americans filed initial claims under the program, which now includes data from 35 states. 

Over 38 million initial claims in total have been filed over the last 9 weeks. That’s higher than the total number of cumulative initial claims over the entire Great Recession, which lasted 18 months.

The current labor market situation is “dramatically worse” than the great recession, according to Shierholz. 

It’s likely that claims will remain high, pushing the total number to additional records. In recent weeks, many states have started reporting initial claims filed through Pandemic Unemployment Assistance, a new program that gives extended benefits to people that might not have been previously eligible such as gig workers or the self employed. 

The program is modeled after disaster unemployment insurance that goes out to specific areas hit by hurricanes or other natural disasters. In the week ending May 16, 2.2 million Americans filed initial claims under the program, which now includes data from 35 states. 

The unemployment rate has spiked to a post-war high of 14.7% in April, well above the Great Recession-era peak of 10.0% in October 2009.

The dramatic surge in the unemployment rate in such a short period went beyond beating the great recession — in two months, the current crisis dwarfed every recession going back to 1948. 

It could get even worse and potentially threaten the all-time high estimate of roughly 25% unemployment during the Great Depression, as the April jobs report is likely an under count of economic pain.

First, there was a potential quirk in the data — if people who marked themselves employed but absent from work for other reasons were marked as unemployed on temporary layoff, the rate would’ve been roughly 5 percentage points higher, according to the Bureau of Labor Statistics. 

Many workers also dropped out of the labor force during the month, likely due to the coronavirus pandemic. A broader measure of unemployment that includes discouraged workers surged to 22.8% in April. 

The unemployment rate in May could go even higher as Americans continue to loose millions of jobs each week. Zhao of Glassdoor said that unemployment will likely rise to the high teens in May and could even break 20%.

An estimate by the Federal Reserve Bank of St. Louis thinks it could spike to 32%, beating the Great Depression record. 

Retail and food service sales have been hit especially hard, and have fallen nearly 25% from their peak in January.

As the labor market has deteriorated, many economic indicators have posted record drops or spikes amid the coronavirus pandemic, showing just how widely-spread the impact of the lockdowns have been on the US economy.

Retail sales and consumer spending have tanked compared to other economic downturns due to the nature of shutting down essential businesses to curb the spread of COVID-19. The sharp lockdown of the economy, including bans on non-essential business, was not seen during the great recession. 

But going forward, how the labor market recovers will impact other areas of the economy. 

“It is important to focus on labor market indicators because they are tied to every other part of the economy,” said Zhao. “Consumer spending is deeply tied to whether people have jobs and are making an income.” 

US gross domestic product is expected to post a staggering 40% drop in the second quarter, nearly five times the 8.4% slump in the worst quarter of the Great Recession.

US gross domestic product slumped 4.8% in the first quarter, the biggest drop since the great recession. Still, the first quarter figure only included the first two weeks of US coronavirus-induced lockdowns, so the worst is yet to come. 

Economists are forecasting that US GDP will post a sharp drop in the second quarter, reflecting the impact of coronavirus lockdowns. Major banks including JPMorgan, Bank of America, and Goldman Sachs expect GDP to contract about 40% in the second quarter — roughly in line with the government’s own expectations.

If GDP does fall that much in the second quarter, it will dwarf the 8.4% slump in the fourth quarter of 2008, the worst amid the great recession. 

Source: businessinsider
These 5 charts show how the coronavirus crisis has dwarfed the Great Recession in just 2 months