The Covid-19 pandemic has hit the economy of the United States as much as that of other countries.
However, experts and officials are trying to determine whether these adverse effects will be permanent or temporary.
The first case of Covid-19 was recorded in January 2020 in the United States. The economy of $21.4 trillion has been wracked with an increase in the number of cases in March and April 2020.
Economic activity has virtually ceased due to restrictions imposed to contain the virus. These precautions made it possible to lower the number of cases in summer, and the economy reported improved during this period.
From September 2020, cases started to increase again, and restrictions were once again imposed. This has reinforced the unpredictability of the US economy.
— Historical Contraction Of The Economy
The US economy had recorded a growth rate of 2.2% in 2019, then a growth rate of -5% in the first quarter of 2020, because of the pandemic.
The United States subsequently recorded a historic contraction of 31.4% in the second quarter of 2020 and historic growth of 33.4% in the following quarter, thanks to the gradual recovery of economic activity.
The US Central Bank (Fed) forecast a contraction of 2.4% in 2020 and growth of 4.2% in 2021, 3.2% in 2022, and 2.4% in 2023.
For its part, the International Monetary Fund forecast a contraction of 4.3% in 2020 and a growth of 3.1% in 2021.
— Increase In The Budget Deficit
The federal government's budget deficit reached a record high of $3.1 trillion in 2020. This deficit was $984 billion in 2019.
Federal government revenues declined in 2020 due to the pandemic as its spending increased through aid packages announced to protect citizens.
— The Rising Unemployment Rate
The unemployment rate was 3.5% in February 2020, the lowest rate in 50 years. It rose to 4.4% in March and 14.7% in April.
Employment saw a record decline in March, and in April, 22 million people lost their jobs.
The partial lifting of restrictions helped reduce the unemployment rate to 13.3% in May, to 11.1% in June, to 10.2% in July, to 8.4% in August, to 7.9 % in September, to 6.9% in October, and 6.7% in November and December.
The Fed forecast a rate of 6.7% in 2020, 5% in 2021, 4.2% in 2022 and 3.7% in 2023.
— Reduced Inflation Rate
The rate of inflation fell during the pandemic in the United States.
The Fed had set an inflation rate of around 2% as a target. But the country has been far from achieving this goal.
The annual inflation rate was 2.3% in February 2020, then 1.5% in March, 0.3% in April, and 0.1% in May.
The rate improved from June: it was 0.6% in June, 1% in July, 1.3% in August, 1.4% in September, and 1.2% in October and November.
The Fed forecast a rate of 1.2% in 2020, 1.8% in 2021, 1.9% in 2022 and 2% in 2023.
— Increase In The Trade Deficit
The pandemic has also affected foreign trade.
The country posted a trade deficit of $576.9 billion in 2019. This figure was $694.8 billion in the first 11 months of 2020, an increase of 13.8% year-on-year.
US exports fell 17.3% in the January-November 2020 period, year-on-year ($1.9 trillion), and imports fell 10.7% ($2.5 trillion).
— Rapid Response To The Economic Effects Of The Pandemic
The US government quickly took financial precautions to minimize the adverse impact on the country's economy.
The US Congress approved three support packages in March for households and businesses, and two other steps followed.
The government spent 8.3 billion dollars on March 6 for laboratory tests, developing treatment, and screening.
On March 18, the precautionary package of around $104 billion was devoted to free tests, leave, food aid, unemployment fund, and medical aid to states.
— The Most Extensive Economic Aid Package In American History
The $2.3 trillion financial support package intended to fight the pandemic and support negatively affected people and businesses was approved on March 27.
It is the most extensive economic aid package in American history, aimed at supporting employees ($1,200 per person) as well as employers (a total credit program of $349 billion).
An amount of 500 billion dollars has been provided to large companies so that they do not lay off their employees or undermine their rights and do not relocate.
A final additional package of 484 billion dollars was then adopted to support businesses and medical centers.
— Debate Around The Latest Aid Package
On August 8, US President Donald Trump signed four decrees on student loans, aid for unemployed people, taxes on slips, and prohibiting homeowners from evicting their tenants.
Aid for unemployed people and the ban on homeowners have been extended until the end of 2020. Student loans and debts have been postponed until further notice.
Republicans and Democrats argued for months about a $900 billion aid package, finally approved on December 27.
Calling it "terrible" at first, Trump then signed the package that was mounted in the $1.4 trillion budget planned for 2021. It was the country's second-largest aid package.
In total, around $4 trillion in aid have been provided in the context of the Covid-19 pandemic.
It is expected that the Joe Biden Administration (President-elect) will continue to provide such assistance. Biden had promised more help to the American people.
— Fed Policy
The Fed cut interest rates to zero and launched unlimited monetary enlargement, with increasing economic risks.
It first lowered the key interest rate to 1-1.25% on March 3. A second cut was announced on March 15, removing the rate to 0-0.25%. The Bank then announced a monetary enlargement of 700 billion dollars.
On April 9, the institution announced credit programs that will provide credit up to $2.3 trillion.
The Federal Open Market Committee (FOMC) said at its last meeting in 2020 that the economy's development largely depends on the pandemic and that the risks to economic activity, employment, and inflation endure.
The Bank has thus signaled that it will not change interest rates until 2023.