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Although the powers that be have yet to formally declare the U.S. in a recession, it’s not hard to see that the coronavirus crisis is decimating the economy.
The Bureau of Economic Analysis confirmed the damage Thursday, announcing that the U.S. gross domestic product decreased 5% in the first quarter of 2020. And that only refers to goods and services produced through the end of March — at which point the state shutdowns were only just beginning.
It’s almost certain the numbers are going to get worse. But what may still be unclear is how a recession could affect you personally.
Everyone will be impacted in some way, according to Martha Gimbel, manager of economic research at Schmidt Futures. Recessions influence people’s wallets and emotional health. But some consequences may be more tangible, and some demographics may be hit harder, than others.
“This is an economic situation in which almost nowhere is safe,” Gimbel says.
Here are a few things you can expect.
You Might Lose Your Job
Perhaps the most obvious outcome is job loss. Roughly 40 million people have filed for unemployment since the middle of March. Federal Reserve Chair Jerome Powell recently predicted the unemployment rate could reach 25% — a level not seen since the Great Depression.
Certain industries are already suffering. Data from the Bureau of Labor Statistics showed that the leisure and hospitality industry lost 7.7 million jobs in April alone; employment in education and health services dropped by 2.5 million that same month.
This is worrisome because “it is very easy to lose jobs. It is incredibly difficult to get jobs back,” Gimbel says. “It is incredibly easy to lose businesses. It is really difficult to get businesses back.”
Another setback: Prior to the coronavirus outbreak, the economy was in such a good place that marginalized groups were joining the workforce. Women, formerly incarcerated people and people with disabilities “were finding opportunities in the labor market” that hadn’t been there before, Gimbel says.
As those chances vanish, the U.S. could experience an “invisible loss.”
“There are so many people who had been suffering economically for so long and had only started to get benefits of the hot economy in the last year or so,” she adds. “Those people are in a really bad situation going into this.”
Things Are Going to Change at Work
Even if your role is secure, work could get tricky. You “may feel like, ‘Well, OK, I held onto my job,’ but everyone loses out in a recession because the economy’s not growing,” Gimbel says.
For example, she adds, it could be harder for you to get a raise. A WorldatWork survey found that in 2009, during the Great Recession, the average salary budget increase was 2.2%. For some 15 years beforehand, it had hovered around 4%.
It could also be tough for you to switch jobs. The national quit rate is already sinking. We know from a 2014 letter from the Federal Reserve Bank of San Francisco that career changes decline during recessions, and a Glassdoor report found that job listings have dropped nearly 28% since the beginning of March.
Setting boundaries with your boss may also become more complicated, leaving parents in a particularly challenging spot.
“In a tight labor market, employers are going to be more willing to say, ‘OK, you can leave the office at 4 to pick up your kids from school,'” Gimbel says. “Now, not only can employers not be as flexible, but also many women who are working from home are trying to balance working with looking after their kids. Long run, I’m very scared for what we’re going to see for the impacts on women and other people who have fewer resources to balance this moment.”
Recovery Will Be Weird
You may be tired of people calling these times “unprecedented,” but they are. That’s partially due to the fact that this isn’t rooted in a financial crisis. It’s a health issue.
“Unlike past natural disasters, Covid-19 is a multi-month shock that is not local in nature, disrupts labor market activities rather than destroys capital, and harms the social and physical well being of individuals,” as analysts wrote in an April working paper for the National Bureau of Economic Research.
It’s unclear what recovery will look like, in part because of this recession’s unique nature. Craig Fehr, an investment strategies principal with Edward Jones, says that traditionally the onset of recessions are a gray area as conditions build upon each other. That’s not the case this time around, when the economic downturn happened “instantaneously and very impressively,” he says.
“It was a self-imposed elimination of consumption,” Fehr says, referring to the various state shutdowns. “People couldn’t spend even if they had a job and they wanted to.”
That’s important when we’re considering recovery. Economists use different letters to describe the shape of a line on a chart tracking economic activity — V for a recession that happens and ends fast, U for one that bottoms out for a while before returning to normal, and W for one that takes two dips before fully rebounding.
Fehr predicts there will be a degree of quick recovery with this recession because as soon as people are safely able to patronize businesses again, they will do so. But that might not make up the gap.
We’ll probably see “green shoots of a rebound in the economy,” Fehr says.
However, he adds that those will likely be coupled with health care setbacks and “the fact that certain geographies or industries are going to have a hard time restarting relative to where we were.”
And It May Take a Long Time
According to the NBER, the average recession lasts 17.5 months. But that doesn’t necessarily mean everything will be copacetic the second the lockdowns are over.
“Given the broad-based nature of the retrenchment in the labor market, we speculate that the economic downturn will be lasting,” analysts wrote in a May NBER paper. “The current damage done to the economy is not solely caused by the stay-at-home orders; it is too large and pervasive. Therefore it is unlikely to be undone simply by lifting these stay-at-home orders.”
Some industries and cities — think Seattle and New York City, considered epicenters of the coronavirus — could take a while rebound. On the other hand, tech- and health care-related jobs may bounce back quicker than others.
Because so much economic data is backwards-looking, Fehr says we’ll likely continue to see disheartening numbers throughout the summer.
“We are probably going to be out of recession before we feel like we are out of recession,” Fehr says. But he notes that “even as conditions start to improve and that unemployment drops, there is still going to be trauma and scar tissue left.”
“For a certain percentage of the labor force, the effects are going to be felt well after it’s officially declared to be over,” he adds.