2020s in economic history

The COVID-19 recession is a major ongoing global economic crisis which has caused both a recession in some nations, and in others a depression. It is currently the worst global economic crisis in history, surpassing the impact of the Great Depression. The economic crisis began due to the economic consequences of the ongoing COVID-19 pandemic. The first major sign of a recession was the collapse of markets during the 2020 stock market crash, which began in late February and lasted through March.[1][2][3][4][5][6] As of September 2020, every advanced economy is in a recession or depression, whilst all emerging economies are in recession.[7][8][9] Modeling by the World Bank suggests that in some regions a full recovery will not be achieved until 2025 or beyond.[10][11][12][13]

The 2020 stock market crash was a major and sudden global stock market crash that began on 20 February 2020 and ended on 7 April.

The crash was the fastest fall in global stock markets in financial history and the most devastating crash since the Wall Street Crash of 1929. The crash, however, only caused a short-lived bear market, and in April global stock markets re-entered a bull market, which would continue until late October of that year.[14][15][16]

On 8 March 2020, Saudi Arabia initiated a price war with Russia, facilitating a 65% quarterly fall in the price of oil. In the first few weeks of March, US oil prices fell by 34%, crude oil fell by 26%, and Brent oil fell by 24%. The price war was triggered by a break-up in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over proposed oil-production cuts in the midst of the COVID-19 pandemic. Russia walked out of the agreement, leading to the fall of the OPEC+ alliance. Oil prices had already fallen 30% since the start of the year due to a drop in demand. The price war is one of the major causes and effects of the currently ongoing global stock-market crash.

In early April 2020 and again in June 2020, Saudi Arabia and Russia have agreed to oil production cuts.[17][18][19] The price became negative on 20 April. Oil production can be slowed, but not stopped completely, and even the lowest possible production level resulted in greater supply than demand; those holding oil futures became willing to pay to offload contracts for oil they expected to be unable to store.

The retail apocalypse continued xacerbated by the COVID-19 pandemic, as many were forced to shut down due to lockdowns responding to the pandemic.[20] This has affected at least Pier 1,[21] Neiman Marcus,[21] Tuesday Morning,[22] GNC,[23] and Brooks Brothers.[24]

The Trump tariffs continued to stay largely in effect.

The World Trade Organization says that trade growth has stagnated and that the number of trade restrictions is increasing as the decade begins. The sectors most affected by import restrictions are mineral and fuel oils (17.7%), machinery and mechanical appliances (13%), electrical machinery and parts (11.7%), and precious metals (6%).[25] On the other hand, regional trade agreements are increasing.[26]

The Brexit withdrawal agreement went into effect at the end of January 2020.[27] Mexico and the United States have signed the USMCA agreement, and Canada has signed it as of March 2020.[28][29]

In April 2020, Sub-Saharan Africa appeared poised to enter its first recession in 25 years, but this time for a longer duration.[30] The World Bank predicted that overall sub-Saharan Africa's economy would shrink by 2.1%–⁠5.1% during 2020. [31] African countries cumulatively owe $152 billion to China from loans taken 2000–2018; as of May 2020, China was considering granting deadline extensions for repayment, and in June 2020, Chinese leader Xi Jinping said that some interest-free loans to certain countries would be forgiven.[32][33]

Before the pandemic, there were signs of recession. The US yield curve inverted in mid-2019, usually indicative of a forthcoming recession.[34][35]

Starting in March 2020, job loss was rapid. About 16 million jobs were lost in the United States in the three weeks ending on 4 April.[36] Unemployment claims reached a record high, with 3.3 million claims made in the week ending on 21 March. (The previous record had been 700,000 from 1982.)[37][38] On 8 May, the Bureau of Labor Statistics reported a U-3 unemployment (official unemployment) figure of 14.7%, the highest level recorded since 1941, with U-6 unemployment (total unemployed plus marginally attached and part-time underemployed workers) reaching 22.8%.[39]

Restaurant patronage fell sharply across the country,[40] and major airlines reduced their operations on a large scale.[41] The Big Three car manufacturers all halted production.[42] In April, construction of new homes dropped by 30%, reaching the lowest level in five years.[43]

Approximately 5.4 million Americans lost their health insurance from February to May 2020 after losing their jobs.[44][45]

The St. Louis Fed Financial Stress Index increased sharply from below zero to 5.8 during March 2020.[46][47] The United States Department of Commerce reported that consumer spending fell by 7.5 percent during the month of March 2020. It was the largest monthly drop since record keeping began in 1959. As a result, the country's gross domestic product reduced at a rate of 4.8 percent during the first quarter of 2020.[48]

The largest economic stimulus legislation in American history, a $2 trillion package called the CARES Act, was signed into law on 27 March 2020.[49]

The Congressional Budget Office reported in May 2020 that:

• The unemployment rate increased from 3.5% in February to 14.7% in April, representing a decline of more than 25 million people employed, plus another 8 million persons that exited the labor force.
• Job declines were focused on industries that rely on "in-person interactions" such as retail, education, health services, leisure and hospitality. For example, 8 of the 17 million leisure and hospitality jobs were lost in March and April.
• The economic impact was expected to hit smaller and newer businesses harder, as they typically have less financial cushion.
• Real (inflation-adjusted) consumer spending fell 17% from February to April, as social distancing reached its peak. In April, car and light truck sales were 49% below the late 2019 monthly average. Mortgage applications fell 30% in April 2020 versus April 2019.
• Real GDP was forecast to fall at a nearly 38% annual rate in the second quarter, or 11.2% versus the prior quarter, with a return to positive quarter-to-quarter growth of 5.0% in Q3 and 2.5% in Q4 2020. However, real GDP was not expected to regain its Q4 2019 level until 2022 or later.
• The unemployment rate was forecast to average 11.5% in 2020 and 9.3% in 2021.[50]

In June 2020, economic analyst Jim Cramer said that the response to the COVID-19 recession has led to the biggest transfer of wealth to the ultra-wealthy in modern history.[51] On 30 July 2020, it was reported that the U.S. 2nd quarter gross domestic product fell at an annualized rate of 33%.[52]

Australia before the recession was suffering from an unusually severe and expensive bushfire season which damaged the economy and domestic trade routes.[53] Not only that, but Australia had experienced significant slowdown in their economic growth, with economists in late 2019 saying that Australia was 'teetering on the edge of a recession'.[54] As a result of this and the effects of the recession, Australia is expecting a deep recession with at least 10.0% of the able working population becoming unemployed according to the Australian treasury and at least a 6.7% GDP retraction according to the IMF.[55][56] In April 2020, a water consultant predicted a shortage of rice and other staples during the pandemic unless farmers' water allocations were changed.[57]

The unemployment level of 5.1% is projected to rise to a 25-year high of 10.0%, according to Treasury data released in April 2020.[58][59] The Jobseeker Allowance unemployment benefit was doubled in April, but Prime Minister Scott Morrison said that this would likely be reduced when the pandemic ends.[60]

On 12 March 2020 the Government announced a A$17.6 billion stimulus package, the first since the 2008 GFC.[61][62] The package consists of multiple parts, a one-off A$750 payment to around 6.5 million welfare recipients as early as 31 March 2020, small business assistance with 700,000 grants up to $25,000 and a 50% wage subsidy for 120,000 apprenticies or trainees for up to 9 months, 1 billion to support economically impacted sectors, regions and communities, and $700 million to increase tax write off and $3.2 billion to support short-term small and medium-sized business investment.[61][63]

On 30 March the Australian Government announced a $130 billion "JobKeeper" wage subsidy program. The JobKeeper program would pay employers up to $1500 a fortnight per full-time, part-time or casual employee that has worked for that business for over a year. For a business to be eligible, they must have lost 30% of turnover after 1 March of annual revenue up to and including $1 billion. For businesses with a revenue of over $1 billion, turnover must have decreased by 50%. Businesses are then required by law to pay the subsidy to their staff, in lieu of their usual wages.[64] This response came after the enormous job losses seen just a week prior when an estimated 1 million Australians lost their jobs. This massive loss in jobs caused the myGov website to crash and lines out of Centrelink offices to run hundreds of metres long.[65] The program was backdated to 1 March, to aim at reemploying the many people who had just lost their jobs in the weeks before. Businesses would receive the JobKeeper subsidy for 6 months.[64]

The announcement of the JobKeeper wage subsidy program is the largest measure announced by the Australian Government in response to the economic impact of the COVID-19 Outbreak. In the first hour of the scheme, over 8,000 businesses registered to receive the payments. The JobKeeper wage subsidy program is one of the largest economic packages ever implemented in the history of Australia.[64]

As of April 2020, up to a million people have been laid off due to effects of the recession.[66] Over 280,000 individuals applied for unemployment support at the peak day.[67]

On 23 July 2020, Josh Frydenberg delivered a quarterly budget update stating the government had implemented a $289 billion economic support package. As a result, the 2020–21 budget will record a $184 billion deficit, the largest since WWII. Australia will maintain their triple A credit rating. Net debt will increase to $677.1 billion at 20 June 2021. Further, real GDP is forecast to have fallen sharply by 7% in the June quarter with unemployment anticipated to peak at 9.25% in the December quarter. However, due to the further reinstatement of restrictions on Victoria, notably stage 4 restrictions, national unemployment is now set to reach 11%. The 2020–21 Budget will be handed down on 6 October, delayed from May.[68] Treasury estimates now place Australia on track to experience a depression, with Australia experiencing a 0.25% contraction in GDP in the 2019–20 financial year, and predictions now expecting a greater than 2.5% contraction in the financial year of 2020–21.[69]

In September 2020 the Australian Government passed changes to "JobKeeper" wage subsidy program. From September 28, the payment will fall to $1,200 a fortnight, followed by a further drop at the beginning of January 2021 to $1,000.[70][71]

As a result of the recession, China's economy contracted for the first time in almost 50 years.[72] The national GDP for the first quarter of 2020 dropped 6.8% year-on-year, 9.8% quarter on quarter, and the GDP for Hubei Province dropped 39.2% in the same period.[73]

In May 2020, Chinese Premier Li Keqiang announced that, for the first time in history, the central government would not set an economic growth target for 2020, with the economy having contracted by 6.8% compared to 2019 and China facing an "unpredictable" time. However, the government also stated an intention to create 9 million new urban jobs until the end of 2020.[74]

In late January, economists predicted a V-shaped recovery. By March, it was much more uncertain.[75]

The IMF predicted the growth rate of India in the financial year of 2020–21 as 1.9%,[76] but in the following financial year, they predict it to be 7.4%.[77] IMF also predicted that India and China are the only two major economies that will maintain positive growth rates.[78] However the prediction later turned out to be wrong.

On 24 June 2020 IMF revised India's growth rate to -4.5%, a historic low. However, IMF said India's economy is expected to bounce back in 2021 with a robust six percent growth rate.

On 31 August 2020, the National Statistical Office (NSO) released the data, which revealed that the country's GDP contracted by 23.9 per cent in the first quarter of 2020–21 financial year. The economic contraction followed the severe lockdown to contain the COVID-19 pandemic, where an estimated 140 million jobs were lost. According to the Organisation for Economic Co-operation and Development, it was the worst fall in history.  [79]

In Japan, the 2019 4th quarter GDP shrank 7.1% from the previous quarter[80] due to two main factors. One is the government's raise in consumption tax from 8% to 10% despite opposition from the citizens. The other is the devastating effects of Typhoon Hagibis, also known as the Reiwa 1 East Japan Typhoon (令和元年東日本台風, Reiwa Gannen Higashi-Nihon Taifū), or Typhoon Number 19 (台風19). The 38th depression, 9th typhoon and 3rd super typhoon of the 2019 Pacific typhoon season, it was the strongest typhoon in decades to strike mainland Japan, and one of the largest typhoons ever recorded at a peak diameter of 825 nautical miles (950 mi; 1529 km). It was also the costliest Pacific typhoon on record, surpassing Typhoon Mireille's record by more than US$5 billion (when not adjusted for inflation).[81] In the resort town of Hakone, record rainfall of almost a meter (942.3 mm, 37.1 inches) fell in only 24 hours.[82] This adds to the effect of the pandemic on people's lives and the economy, the prime minister unveiling a 'massive" stimulus amounting to 20% of GDP.[83]

The European Purchasing Managers' Index, a key indicator of economic activity, crashed to a record-low of 13.5 in April 2020.[84] Normally, any figure below 50 is a sign of economic decline.[84]

On 19 March 2020 the Bank of England cut the interest rate to a historic low of 0.1%.[85] Quantitative easing was extended by £200 billion to a total of £645 billion since the start of the Great Recession.[86] A day later, the Chancellor of the Exchequer Rishi Sunak announced the government would spend £350 billion to bolster the economy.[87] On 24 March non-essential business and travel were officially banned in the UK to limit the spread of SARS-CoV-2.[88] In April the Bank agreed to extend the government's overdraft facility from £370 million to an undisclosed amount for the first time since 2008.[89] Household spending fell 41.2% in April 2020 compared with April 2019.[90] April's Purchasing Managers' Index score was 13.8 points, the lowest since records began in 1996, indicating a severe downturn of business activity.[91]

By the start of May, 23% of the British workforce had been furloughed (temporarily laid off). Government schemes were launched to help furloughed employees and self-employed workers whose incomes had been affected by the outbreak, effectively paying 80% of their regular incomes, subject to eligibility.[92] The Bank estimated that the UK economy could shrink 30% in the first half of 2020 and that unemployment was likely to rise to 9% in 2021.[93] Economic growth was already weak before the crisis, with 0% growth in the fourth quarter of 2019.[94] On 13 May, the Office for National Statistics announced a 2% fall in GDP in the first quarter of 2020, including a then-record 5.8% monthly fall in March. The Chancellor warned it was very likely the UK was going through a significant recession.[95]

HSBC, which is based in London, reported $4.3 billion in pre-tax profits during the first half of 2020; this was only one-third of the profits it had taken in the first half of the previous year.[96]

On 12 August, it was announced that the UK had entered into recession for the first time in 11 years.[97]