COVID-19’s Impact on the Economy, 2 Years Later

Composite design of the American Flag and cash money to depict the Stimulus checks Americans received during the COVID-19 crisis.
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A little more than two months after the first cases of what would become the coronavirus emerged at the tail end of 2019, the U.S. economy went dark. Now, on the two-year anniversary of the first shutdowns, the full effects of the pandemic are coming into clearer focus.

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Using data from the Bureau of Labor Statistics, Freddie Mac, the Bureau of Economic Analysis, the University of Michigan and the International Monetary Fund, GOBankingRates crafted a retrospective analysis of how the pandemic years impacted key factors like GDP, unemployment, income, interest rates and the price of oil.

Here’s what we learned.

National GDP

On Feb. 26, 2020, a CDC doctor named Nancy Messonnier warned the nation that “disruption to everyday life may be severe” during the country’s response to the arrival of a terrifying new virus. Less than a month later on March 14, the CDC issued a no-sail order to all cruise ships in American waters. The very next day, Ohio closed all bars and restaurants in the state and New York City shut down the largest public school system in America, pulling 1.1 million kids out of class.

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Within a few days, the American economy had ground to a halt — and the evidence is in the GDP.

Gross domestic product represents the monetary value of all the finished goods and services that the country produces — and between the first and second quarters of 2020, America’s cratered by nearly one-third when the national GDP nose-dived by an incredible 31.2%.

But for every action, there’s an equal and opposite reaction, and come springtime, America learned that it gained back all it had lost and then some when the GDP rose by 33.8% between the second and third quarters.

After that, America’s economy kept expanding at the following quarterly rates:

  • Q4 2020: 4.5%
  • Q1 2021: 6.3%
  • Q2 2021: 6.7%
  • Q3 2021: 2.3%
  • Q4 2021: 7%

You’ll notice that the economy expanded by less in the third quarter of last year, which coincided with the arrival of the deadly delta strain.

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Brent Crude Oil Price Per Barrel

When the economy shuttered, America’s highways became ghost roads and oil-fueled factories went dark. In the second quarter of 2020 — at the same time that the country’s GDP went kaput — the price of Brent crude oil was just $30.33 per barrel.

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For context as to just how far the global demand for oil and gas had fallen during those grueling early days of the pandemic, the same barrel of oil cost nearly twice as much by the first quarter of 2021 — $59.26, to be exact.

But there was more at play than just the standard supply-and-demand dynamic. Last year’s money-robbing inflation was especially painful at the pump, and when post-pandemic demand finally did pick back up, the price of oil never stopped rising. It hit $67.05 in the second quarter of 2021, then $71.64 in the third and $78.31 in the fourth. 

Interest Rates for 30-Year Fixed Mortgages

In 2021, home prices rose by an unprecedented rate of nearly 19% — and they’re still rising today. Much of that growth was driven by cheap money — the cheapest in history, actually. Officials slashed interest rates to historic lows to encourage borrowing and keep the economy moving.

In the second quarter of 2020, the interest rate for a 30-year fixed mortgage was 3.24% — already very low, historically speaking. After peaking at 18.6% in October 1981, rates held above 8% for much of the ’90s and above 6% for much of the 2000s.

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In the third quarter of 2020, rates breached the 3% mark when they hit 2.95% before falling to 2.76% in the fourth quarter. As the economy recovered, rates ticked back up, first to 2.88% in the first quarter of 2021, then to 3% in the second. In the third quarter, with the arrival of the delta variant, rates dropped again briefly, this time to 2.87%, before climbing back up to 3.08% in the fourth quarter.

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Personal Income Per Capita, Adjusted for Inflation

Despite a nationwide epidemic of inflation and unemployment, you might not have known there was a pandemic at all if you looked only at the national per capita income. That’s because a trio of massive stimulus packages provided expanded unemployment payments that did exactly what they were designed to do — give the pandemic’s millions of professional casualties a steady flow of income. Here’s how it played out during the two years of the pandemic:

  • Q2 2020: $55,020
  • Q3 2020: $53,024
  • Q4 2020: $52,058
  • Q1 2021: $58,609
  • Q2 2021: $54,627
  • Q3 2021: $54,718
  • Q4 2021: $54,728

You’ll notice that income levels were highest in the second quarter of 2020 when Congress passed the CARES Act then again in the first quarter of 2021 with the arrival of the American Rescue Plan.

Unemployment Rates

If the pandemic’s effects weren’t obvious in the country’s per capita income, the unemployment rate made everything clear — no amount of stimulus could make a nation of “closed” signs appear to be something else.

At the height of the Great Recession, unemployment peaked at 10.0%, but in the second quarter of 2020, even that grueling number was dwarfed by nearly one-third when America’s jobless rate hit 13%. It was the worst that things had been since the government first started keeping records in 1948.

It was also temporary.

The next quarter, the rate dropped to 8.8%, then to 6.8% in the fourth quarter. The gains continued in 2021, with the rate falling to 6.2% in the first quarter, then to 5.9% in the second, 5.1% in the third and finally to 4.2% — full employment — in the fourth quarter of 2021.

PCE Price Index

The consumer price index (CPI), which economists use to measure inflation, tracks price changes among baskets of goods and services that consumers purchase across the entire economy. The personal consumption expenditures price index (PCE Price Index) also tracks consumer spending, but it includes a broader range of goods, services and buyers. Those added buyers include all households — not just urban households, which the CPI measures exclusively — and nonprofit institutions that serve households.

The PCE Price Index increased by 3.7% in 2019, but the coronavirus put a stop to that. In the second quarter of 2020, the PCE Price Index fell by 1.6%, with healthcare, recreation, and food services and accommodations accounting for most of the drop, according to the Bureau of Economic Analysis.

The next quarter — the same quarter that America regained all of its GDP growth and more — the PCE Price Index vaulted up by 3.7%. The next quarter, it fell back down to Earth with growth of just 1.5%. It more than doubled to 3.8% in the first quarter of 2021, then nearly doubled again to 6.5% in the second as soaring inflation racked the country. The third quarter of 2021 saw lower, but still high growth of 5.3%. The personal consumption expenditures price index closed out the year with growth of 6.3% in the fourth quarter.

Personal Consumption Expenditures

PCE Price Index reports are supported by personal consumption expenditures, which help to paint a broader picture. The steep second-quarter 2020 drop in the PCE Price Index was -1.6%, which might not sound like a lot. But that same quarter, the corresponding personal consumption expenditures that number represents fell drastically by 33.4% — more than even that quarter’s radical GDP drop of -31.2%.

Just like the GDP, personal consumption expenditures came roaring back in the third quarter with blockbuster growth of 41.4% as stimulus-flush households went on spending sprees. The roller coaster continued in the fourth quarter when personal consumption expenditure growth slowed all the way down to 3.4% as the stimulus money ran out.

When fresh stimulus arrived, the trend continued as personal consumption expenditures grew by 11.4% in the first quarter of 2021, then 12% in the second. Here, too, the second half of the year saw a steep decline when personal consumption expenditure growth fell to just 2% in the third quarter and 3.1% in the fourth.

Consumer Sentiment Index

The University of Michigan’s consumer sentiment index measures three key indicators: the way consumers view prospects for their own financial situation, how they view prospects for the overall near-term economy and their perception of the long-term economy’s prospects.

Higher is better, and in the second quarter of 2020, the consumer sentiment index was at a low 74 before climbing to 75.6 in the third quarter and then 79.8 in the fourth.

In the first quarter of 2021, as vaccines arrived and the pandemic waned, the index rose to 80.2, then to 85.6 in the second. As delta cast a pall over the country once again, the index fell down to 74.8 in the third quarter of 2021. In the fourth quarter, consumer sentiment fell even further to a depressing 69.9 — lower than even during the terrifying early days of the pandemic — as ever-rising inflation robbed every American household of its purchasing power.

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Methodology: For this piece, GOBankingRates tracked the U.S. economy’s performance since COVID-related lockdowns in March 2020 were introduced, using the following major economic indicators: (1)GDP; (2)personal income per capita; (3)personal consumption expenditures; and (4)personal consumption expenditures index, all sourced from the Bureau of Economic Analysis. GOBankingRates further tracked (5)unemployment rates, sourced from the Bureau of Labor Statistics; (6)the price per barrel of Brent Crude oil, sourced from the International Monetary Fund; (7)30-year fixed mortgage rates, sourced from Freddie Mac; and (8)consumer sentiment, sourced from University of Michigan’s Consumer Sentiment Index. All data were collected on and up to date as of February 24, 2022.

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street's investment community in New York City.
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