COVID-19 and the economy

A short recession, a deep hole

The National Bureau of Economic Research, which dates US recessions, puts the last month of the expansion in February 2020 and the end of the recession in April 2020: 2 months. That is the shortest of the 34 recessions it has dated since 1857; the next shortest lasted 6 months.

Short is not the same as mild. Real GDP fell 9.1% from Q4 2019 to Q2 2020; after 2008 it fell 4.0%, and that took from Q2 2008 to Q2 2009. By Q1 2021 output was back above its old high. The oddest moments of those months — oil below zero, record jobless claims, a sudden saving spree — are in Strange things that happen in crises. This article follows the jobs, the money and the way back.

2020 around the world

By the World Bank's count the world economy shrank 2.9% in 2020, its deepest fall since the series begins in 1961 (in 2009 it was −1.3%). Of the 193 economies with actual figures for 2020 in the IMF's World Economic Outlook, 156 shrank (81%); no other year since 1980 comes close — the runner-up, 2009, saw 49% of economies shrink. The rebound was unusual too: world GDP grew 6.5% in 2021, the fastest since 1964.

The deepest falls: Macao (−54.4%), Venezuela (−33.2%), Maldives (−32.9%), Lebanon (−28.7%) and Aruba (−23.9%). 4 of the ten deepest — Macao, Venezuela, Lebanon and Saint Lucia — had already been shrinking in 2019, so the virus was not the whole story. At the other end, the fastest-growing economy was Guyana, at +43.5%.

The 20 largest economies: the fall and the way back

Among the 20 largest economies of 2019, the deepest fall was Spain's: −10.9%. Only 2 of them grew: China (+2.3%) and Türkiye (+1.8%). The United States shrank 2.1% and was back above its 2019 output in 2021; 11 of the 20 made it back in 2021. The last to get back, in 2022: Japan, Germany, United Kingdom, France, Italy, Spain and Mexico.

The jobs race: 21.9M lost, 28 months to win them back

US payrolls peaked in February 2020. By April 2020 employers had cut 21,867,000 jobs, 14.4% of all — 20.5M of them in April 2020 alone, the biggest one-month loss since the data begin in 1939 (the runner-up: 1.96M in September 1945, as the Second World War ended). No recession since then came close: the next deepest, 1945, cost 9.5% of payroll jobs. Then came the biggest monthly gain on record: 4.63M in June 2020.

The climb was steep as well. Payrolls were back at their February 2020 level in June 2022, 28 months after the peak — about 841K jobs a month from the low, against 170K a month after 2008, when the climb lasted until May 2014. Measured in months rather than millions it was no record: 7 of the 12 earlier recessions saw a quicker way back, and only 1945, 1990–91, 2001 and 2007–09 took longer.

The way back: 2007–09 against 2020

Count the months from the start of each recession until each gauge was back where it had been. After 2008 stocks needed 63 months, real GDP 34, payroll jobs 77 and the unemployment rate 93. After 2020: 6, 11, 28 and 29. Every one of the four came back faster this time.

The jobless rate tells the story in one number: it jumped from 3.5% in February 2020 to 14.8% in April 2020 — higher than its 10.0% peak after 2008 — and was back at 3.5% by July 2022. One gauge has not come back: the share of adults working or looking for work was 63.3% in February 2020 and 61.9% in October 2026 (an older population accounts for part of the gap).

The relief money, as officially counted

Between March 2020 and March 2021 Congress passed 6 COVID-19 relief laws. USAspending.gov, the Treasury's public spending site, tracks the money spent under them: $4.68T of budgetary resources, of which $4.52T had been paid out by August 31, 2026. The biggest single items: the stimulus checks ($860B, the IRS's “U.S. Coronavirus Payments”), the Small Business Administration's loan account that carried the Paycheck Protection Program ($828B), the Coronavirus Relief Fund for states and cities ($500B) and unemployment benefits ($668B).

In the chart below each square is $10B. Households got 26% of the money, businesses and their workers 23%, states, cities, schools and transit 20%, the jobless 15%, health care 9%; everything else took 8%.

The deficit: $3.13T in one fiscal year

In fiscal 2020 (October to September) the federal government spent $6.55T and ran a deficit of $3.13T — 14.7% of GDP, the largest share since fiscal 1945 — after $984B in fiscal 2019. Spending jumped 47.3% in a year, the biggest one-year rise since fiscal 1952.

Month by month, the Treasury's statements show the shock. In June 2020 alone outlays were $1.1T and receipts $241B: a deficit of $864B in one month, 88% of the deficit of the whole of fiscal 2019. Fiscal 2021 added $2.77T more (11.7% of GDP).

2007–09 against 2020: the size of the response

The two crises side by side, on the same four measures. The worst-year deficit of the 2020 crisis was 2.2 times that of 2007–09; within 2 years of the peak the Fed added $4.77T to its balance sheet, against $1.36T, and the federal debt grew $6.88T, against $3.08T.

The Fed's balance sheet: ×2.2

The Federal Reserve bought Treasury and mortgage bonds on a scale never seen before. Its total assets went from $4.16T on February 26, 2020 to a peak of $8.97T on April 13, 2022, ×2.2. Since then it has come down to $6.75T (November 4, 2026). After 2008 the same balance sheet had gone from $891B to $2.25T (×2.5) within 2 years.

Stocks: the quickest round trip on record

Measured by monthly averages, the S&P 500 fell 19.1% from January 2020 to March 2020 and was back above its high by August 2020, 7 months after it started. Of the 17 falls of 15% or more since 1871 that ended in a new high, none came back sooner; the runner-up, in 1966, took 19 months.

Monthly averages smooth out the panic: from daily closes the fall was deeper and faster. After 2008 the same index fell 50.8% (monthly averages) from October 2007 and was not back until March 2013, 65 months later. In October 2026 it stood at 7,723, +135.6% against the high of January 2020. Every big fall since 1871 is in Stock market crashes.

Then came inflation

In the 12 months to February 2020 consumer prices rose 2.3%. In the 12 months to June 2022 they rose 9.1%, the fastest since November 1981 (9.6%). The 12-month rate was back below 3% in June 2023. In the 12 months to September 2026: 3.7%.

Did the pandemic cause it? Economists still argue about the shares: snarled supply chains, a shift of spending from services to goods, the relief money and near-zero interest rates, and the jump in energy prices in 2022 all played a part. The bill itself is not in dispute: prices are 30.5% higher than in February 2020, so shopping that cost $100 then cost $130.48 in October 2026. What that does to savings: the inflation calculator.

Where things stand now

The latest figures against February 2020 and the worst point in between. Jobs, output and stocks are measured against their level before the pandemic; prices only go one way.