We’re starting to get a picture of just how much damage the pandemic is doing to the economy. The Commerce Department reported Wednesday that gross domestic product — the total of all the goods and services this economy produces — fell 4.8% in the first quarter.
Household spending was down about 7.5%. Purchases of services fell more than 10%. And durable goods purchases — cars and appliances and stuff — dropped by more than 16%. Businesses weren’t buying either — equipment spending fell more than 15%. And this is only the beginning.
The economy was cranking along in January and February. Then, in early March, we started to hear warnings about the need for COVID-19 social distancing and statewide lockdowns.
Initially, that sent consumers out shopping to stock up — including at Tom Butcher’s music shop in Seattle.
“They really wanted to get some musical instruments and toys maybe to occupy themselves,” Butcher said. But by the middle of March, his store was shut down. “Most of our business just disappeared.”
Multiply that by tens of millions of businesses across the country, and the economy “just fell off a cliff, and we went from everything being open to everything closed,” said Paul Ashworth, chief North American economist at Capital Economics.
It’s not just stores and restaurants and the like. Spending on health care is down too, according to Betsey Stevenson, professor of public policy and economics at the University of Michigan.
“To make room for COVID patients, hospitals really had to shut down a lot of nonessential treatment,” Stevenson said.
Now, keep in mind, all of these declines happened in the last three weeks of the quarter. The economic shutdown really took hold in April.
“The decline in the second quarter is much bigger than the first quarter. We’re thinking it’s somewhere around 40%,” Ashworth said.
On the plus side, Ashworth notes some states are reopening, people are getting stimulus checks and unemployment and small-business loans. But, that prediction of a 40% decline in GDP this quarter already includes all that stimulus money flowing in.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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