September 26, 2023

COVID-19 Impact on U.S. Economy in 2020 and beyond

The U.S. economic outlook is for a U-shaped recession according to the key economic indicators. Governors ordered nonessential businesses to shut down to stop the spread of the COVID-19 pandemic.

As a result, the GDP growth rate could fall as much as 50%.That’s about the depth experienced during the Great Depression, but it shouldn’t last as long. Unemployment could be as high as 30%.

Note: The most critical indicator is the gross domestic product, which measures the nation’s production output.


In just a few months, the COVID-19 pandemic has decimated the U.S. economy. Growth declined by 5% in the first quarter, signaling the onset of the 2020 recession.

The NBER announced in early June that “the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”3

In April, retail sales plummeted 16.4% as governors closed nonessential businesses.4 As companies furloughed workers, the number of unemployed shot up to 23 million.

The Congressional Budget Office predicts a modified U-shaped recovery.

These early indications reveal that the second quarter will be worse. The Congressional Budget Office predicts the economy will decline by 38%.The number of unemployed will rise to 26 million. The third quarter will improve, but not enough to make up for earlier losses. Effects will linger until the fourth quarter 2021, with slightly lower economic output and higher unemployment.

Economic Growth

U.S. GDP growth will contract by 6.5% in 2020. It will rebound to a 5% growth rate in 2021 and 3.5% in 2022. That’s according to the most recent forecast released at the Federal Open Market Committee meeting on June 10, 2020.7


The unemployment rate will average 9.3% in 2020. That’s much higher than the Fed’s 6.7% target. It will drop to 6.5% in 2021 and 5.5% in 2022. The rate peaked at 14.7% in April 2020. More than 20 million workers were let go from their jobs in response to the pandemic.

The real unemployment rate includes the underemployed, the marginally attached, and discouraged workers. For that reason, it is around double the widely-reported rate. You can put this report into perspective by viewing the unemployment rates since 1929.


Inflation will average 0.8% in 2020.7 It will rise to 1.6% in 2021 and 1.7% in 2022. The core inflation rate strips out volatile gas and food prices. The Fed prefers to use that rate when setting monetary policy. The core inflation rate will average 1.0% in 2020, 1.5% in 2021, and 1.7% as well in 2022. The core rate well below the Fed’s 2% target inflation rate. The U.S. inflation rate history and forecast helps predict the coming years’ inflation levels.

Interest Rates

On March 15, 2020, the Federal Open Market Committee held a special meeting to cushion the economic impact of the COVID-19 coronavirus outbreak. It lowered the current fed funds rate to a range between 0.0% and 0.25%. That’s after lowering it to a range of between 1.0% and 1.25% on March 3

The Fed is also working on keeping long-term rates low. It restarted its quantitative easing program. On March 15, 2020, the Federal Reserve announced it would purchase $500 billion in U.S. Treasurys and $200 billion in mortgage-backed securities over the next several months. On March 23, 2020, the FOMC expanded QE purchases to an unlimited amount.  By May 18, its balance sheet had grown to $7 trillion.

Oil and Gas Prices

The U.S. Energy Information Administration provides an outlook on oil and gas prices from 2020 to 2050. It predicts crude oil prices will average $34 a barrel in 2020 and $48/b in 2021.That’s for Brent global. West Texas Crude will average around $4/b less.


The Bureau of Labor Statistics publishes an occupational outlook each decade. It goes into great detail about each industry and occupation. Overall, the BLS expects total employment to increase by 8.9 million jobs between 2018 and 2028.14 

Note :The BLS forecast does not take into account the effects of the COVID-19 pandemic.

Health care occupations will account for 18 of the 30 fastest-growing occupations.14 One reason for that is the aging of the population. Computer and math occupations, and those based on alternative energy production, will also grow rapidly.

Three occupational groups will lose jobs.These include production, administrative support, and sales. These jobs are being replaced by computer and technological solutions. Retail sales will also lose jobs, as e-commerce continues to predominate. That shift will also increase jobs in transportation and warehousing.

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