An Early Look Back at the 2020 Economy Shows Devastation
2020 was a historic year. Looking back, it’s clear that the aftershocks of COVID-19 have served as the biggest catalysts for this highly disruptive period — namely, their effect on the domestic economy. As reports roll in, the devastation has become quantifiable in real numbers.
The most staggering statistic of them all? The U.S. economy contracted by 3.5% in 2020, the largest contraction rate in more than 74 years. Not since WWII has our domestic economy survived such a shock. The good news is, like the post-war economy of the late 1940s, we could be in for a new boom.
The rollercoaster that was 2020
For anyone paying attention to manufacturing indices and reports in 2020, the year was very up and down. Although the pandemic gained its moniker in late January, it wasn’t until March that the true scope of its severity was realized — and by then, it was already too late.
The Manufacturing ISM® Report on Business® took a nosedive in April 2020, after seeing nudging declines in the first quarter. Then, almost as quickly, it rebounded in May, before plateauing in June. The second half of the year saw a progressive return to normalcy, with strong trepidation underlying the figures.
Now, in 2021, it’s clear manufacturing is on a sustainable recovery pace. But for 2020, the damage is done.
Pullback not seen in a generation
While a 3.5% contraction may not seem earth-shattering, it’s not without context. The driving force behind that contraction comes from the absolute obliteration of the goods and services economy in the second quarter. Analysts report that the nation’s Gross Domestic Product (GDP) suffered a “record-shattering 31.4% annual plunge in the April-June quarter.”
The good news — and the reason we’re not amidst a full-blown economic collapse — is that GDP rebounded 33.4% in the early third quarter. Although it outstrips the earlier-year loss, it wasn’t quite enough to recoup losses adding to the end-year economic pullback. With all figures contextualized, the losses of 2020 are shaping up to be tantamount to the Great Recession of 2008.
A glimmer of hope ahead
It’s easy to find devastating economic data about 2020. That said, there are gems and glimmers of hope buried under the catastrophic headlines and within the appealing data that’s coming together for the year.
Perhaps the best metric to focus on is the latest. In the final quarter of 2020, the economy grew at a 4% annual rate. This aligns with the Manufacturing ISM® Report on Business® metrics from October to December 2020, which showed leveling, yet stable growth for the manufacturing sector. It’s a sign that production is ramping back up, spending is back up, and fears about the pandemic are largely realized and accounted for.
It’s impossible to predict the future; however, 2021 seems to be signaling rebirth. New administration, new vaccine, and new levels of perseverance have manifested. If they continue, history could see the economic devastation of 2020 as nothing more than a blip on the radar.