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How is the American economy coping with Covid-19?

The Covid-19 pandemic has battered the American economy. Last week, the National Bureau of Economic Research (NBER) announced that:

…a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.

This is bad news. There are many today who think that too much wealth is a problem, that current levels of consumption are unsustainable, and that both needs to fall while what is left is redistributed. We might be about to see that reducing wealth and consumption is actually not a good thing for people.

But, of course, Covid-19 is a pandemic which means it is breaking out in lots of places, not just the United States. How is are we here faring compared to other afflicted countries?

America – Better than average on GDP

Figure 1 shows data from the Organisation for Economic Co-operation and Development for the growth rate of Gross Domestic Product (GDP) for the first quarter of 2020 compared to the fourth quarter of 2019, seasonally adjusted. So far, the U.S. is doing better than many other countries, economically speaking, at least. With a decline of 1.3, the U.S. ranks 17th out of 41 countries. Not great, but not terrible either, comparatively. Note, too, that we have performed better than Norway, the Netherlands, Britain, Denmark, Canada, Germany, Austria, Switzerland, Belgium, Spain, Italy, and France. The U.S. has performed better than the average for the eurozone (-3.6), the European Union as a whole (-3.2), the G7 (-1.9), and the G20 (-3.4),   

Figure 1: GDP growth rate, 4th quarter 2019 to 1st quarter 2020, %

Source: Organisation for Economic Co-operation and Development

Make no mistake, the U.S. economy has taken a pounding from Covid-19. But so have other economies. To judge how well or badly we have fared, it is reasonable to ask ‘relative to what?’. And, relative to other economies, we are doing kind of ok. Not that that is much consolation. That will only come from a rapid economic recovery.

John Phelan is an economist at the Center of the American Experiment. 

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