2020 began with the omen of being another year of the largest economic expansion for the US, weaker than the previous ones, but with growth nonetheless. And the virus arrived, that coronavirus that appeared in China at the end of 2019, and settled in the country at the end of winter. Then everything changed.
It all got worse very quickly and painfully.
The first measures of social distancing and the almost total closure of economic activity in late winter and early spring led the NBER (National Bureau of Economic Research) cycle committee to make a swift judgment on the situation. The country’s growth peaked in February, and then it entered a recession.
The worst since the Great Depression of the 20th century, that is, worse than the Great Recession of 2008.
The expansion was shattered.
COVID has set the pace at which the world moves and of course the US. The disease has been and is the most important macroeconomic variable, either because it forces a closure of activity to reduce infections or because of the lack of demand that forces a reduction in supply, that is, production.
In April, 20.5 million jobs were lost and the unemployment rate increased by 10.3 percentage points to 14.7%.
Never in history has there been such an extensive and rapid deterioration in the labor market. The real unemployment rate, which is estimated by adding to the equation those who stop actively seeking employment, was then calculated to be around 20%.
With the 18.9% unemployment rate, that of Latinos was the most dramatic note of that moment. 14.2% of whites were unemployed. In the case of women, the statistic was even higher.
And not everyone was included in those figures. Thousands of undocumented people lost their jobs and their wages, women especially: housekeepers, caregivers of children and the elderly have lost their jobs for months without having more resources than the generosity of their employers (when there has been one) or that of community organizations .
Unemployment has been recovering unevenly (the rate was 6.7% in November and 8.4% in the case of Latinos) but it is far from being normalized at pre-crisis levels.
Many people have left the labor market, especially women who have become the social network of their families. When the incidence of the disease has risen again, at the end of the year, unemployment has risen again and layoffs. Today there are more than 20 million people collecting the collection when last year at this time 1.78 million people were in this situation. Without a fiscal stimulus before the end of the year, on December 26 they will be left without it.
In October, the IMF forecasts pointed to the world contraction being 4.4% and in the case of the United States, 4.3%.
But the pandemic has also had another economic effect: not only has it ended the expansion but it has made its face ugly by showing a reality that was known but that had never stood out so harshly, the profound inequality on which it rests .
The virus has been medically cruel to the most vulnerable of health.
And also the economic consequences of COVID have been harsher with those who started with an underlying condition of vulnerability such as low wages, little savings, lack of health insurance, small homes for extended families (how else could they not pay the rent?) And little or no social protection. Many of them stopped working for months and continue to work fewer hours.
Others have been more exposed to the virus as many of the most economically vulnerable have also been considered essential and face-to-face workers.
Many of the essential workers have had to leave their homes and apartments to take care of jobs that have allowed, for example, to continue to have food in supermarkets, to have public transport to function and to clean hospitals overflowing with patients.
Essential but vulnerable and poorly paid. It is the cruel irony that this pandemic leaves behind.
In this sense, there has been an intersection between the economic situation and race or ethnicity that has made Latinos and blacks doubly victims since they are the ones who normally have these jobs.
Faced with such a crisis, states can and should offer the necessary financial assistance. It is a teaching that remains a legacy of previous crises.
The three fiscal stimuli, approved by Congress in Washington, and especially the third, the CARES Act, gave an immense respite to many of the most vulnerable people and the middle class that is seeing their precarious position during this crisis. Extra and expanded unemployment help, direct aid check, state transfers and forgivable loans to small businesses allowed all Social Security taxpayers to get oxygen to the summer. And they even lowered poverty rates.
The undocumented, who pay about $ 79.7 billion in federal taxes annually and $ 41,000 in state, were left without that temporary extension of the social network for the pandemic. The last stimulus approved by Congress on December 21 – late, scarce and very temporary – gives some relief to the undocumented in mixed families since they can receive the direct check (of $ 600 per taxpayer with social security and the children if are Americans) and retroactively to the CARES Act.
The problem is that as of press time, President Donald Trump has decided not to sign the law that contains the tax relief. Trump, who has not been involved in the negotiations, says that the $ 600 check is scarce and wants $ 2,000 but everything indicates that it is a battle with his own party.
This moment of indefiniteness is reached when needs have led to long lines in front of food banks. The ranks of hunger. In Bronxworks, a non-profit organization in one of the counties most affected by the double crisis, The Bronx in New York, they have had to give numbers to go to collect food donations. It was the only way to organize the distribution that is daily, and not every two days as before.
With the agony of hunger (almost 13 out of 100 people suffer from food insufficiency) or the threat of losing their home (9 out of 100, according to census figures), news of the possible agreement in Congress for this minimum final aid, a bridge of support to next year with which to breathe oxygen into Americans, prevent millions of unemployed from being left without income and extend the moratorium on evictions for non-payments.
That minimal aid now depends on the situation created in the Republican party and Trump.
In another cruel twist, some of the measures put in place by the authorities to avoid greater evils have gone to benefit those who did not need much, especially the cheap money from the Federal Reserve that left interest rates at 0% in March.
Between February and March, the main indices of the Wall Street stock market, the S&P 500, the Dow Jones and the Nasdaq fell 35%, 38% and 30% respectively. Also, in a surreal moment in the spring, the price of oil fell so low that it was negative, meaning that sellers paid to dump the barrels.
But in just months all these indices recovered and in fact reached record heights, as if there were no crisis. At the end of this note, the Dow Jones index was 5.6% above its value a year ago, when we were not talking about a pandemic. The S & P500 is 15% above what it was a year ago and the Nasdaq is 43% above its value then. What’s more, whoever invested in this index on March 20, one of the lowest days of the crisis, now has a return on their investment that is around 85%.
So it is not surprising that those who live on these incomes and not only from their work are increasingly wealthy. The Bloomberg agency detailed that the 500 richest people are $ 813 billion richer now than on January 1.
The very strong inequality is a global phenomenon but in the United States it is very acute.
IMF Managing Director Cristalina Georgieva recently wrote that we cannot “and must not return to yesterday’s economy of low growth, low productivity, high inequality and a worsening climate crisis.”
For many, 2020 is a lost year. For few it is a year of earnings, for most it can be a year with which many regress. It all depends on whether or not the objective of having an economy, finally, more inclusive, is heeded.