- The US post-pandemic rebound could be much faster than the 2009 recession.
- One expert said the economy may even end up stronger, which "is crazy to think about."
- Still, experts caution that even a blitz of emergency spending could leave people behind.
- See more stories on Insider's business page.
Last week, President Joe Biden alluded to Ronald Reagan's famous "Morning in America" remark, saying "the sun is coming out." And the economic data supports that. It's a lot like morning in America, 2020s style.
After enduring a year of shutdowns, the country may now be on course for one of its fastest growth periods since the 1980s. The economy regained 850,000 jobs in June, a sharp increase after disappointing gains in May and April. Unemployment claims are falling steadily as well. Should job growth maintain the June trend, payrolls would fully rebound by February, exactly 24 months after the pre-pandemic peak. By comparison, it took 76 months for the US to recoup all jobs lost during the Great Recession.
The recovery from the Great Recession was, by several measures, the most sluggish in US history. The policy response to the coronavirus, including $6 trillion of emergency spending, has not only been more effective, but appears to be crafted with the mistakes of 2009 in mind.
"I'm incredibly encouraged when it's compared to the Great Recession," Mike Konczal, director of macroeconomic analysis at the left-leaning Roosevelt Institute, told Insider. "Responding at the speed and level of crisis as we did with fiscal and monetary support ... means that our economy may not only recover so fast, but it may be stronger than it would have been without it, which is crazy to think about."
The chart below shows the rate of job losses and gains after the Great Recession compared to the coronavirus recession.
Withdrawing federal support in 2012 caused "a lot of scarring" in the labor market, and lawmakers learned from it, Claudia Sahm, a former Fed economist and senior fellow at the Jain Family Institute, said.
"I think of March of 2021 being this pivotal moment like the end of 2012 was," Sahm said. "This time, Congress did the right thing, in terms of pushing more money out."
A new playbook for economic revival
The sheer size of the pandemic-era relief bills dwarfs those seen during the Great Recession. The Obama administration was wary of passing a $1 trillion package in 2009, as officials feared the price tag would erode support from Republicans and even moderate Democrats.
The scope is also drastically different. Instead of allocating funds to tax credits and federal spending programs, recent stimulus sent money directly to households through checks and enhanced unemployment insurance. The use of direct cash relief was the most encouraging aspect of pandemic-era support, Sahm said.
"This time we didn't monkey around with [tax credits]," she told Insider, adding stimulus checks helped Americans pay down debt, build financial buffers, and maintain spending.
To be sure, the two recessions boast some critical differences. The COVID-19 recovery hinged on thwarting the virus's spread. The financial crisis was far more systemic in nature, and it took more than a year for the recovery to even begin.
"Everything about this crisis has been much faster than during the Great Recession," Sahm said. "The bottom fell out, then we hit the bottom, and then we started moving up."
Other experts argued that last year's response deserves a larger share of the credit. "I think fiscal policy in 2020 was really important and what we've seen so far this year has been unneeded and created some real risks in the economy," Douglas Holtz-Eakin, former head of the Congressional Budget Office and GOP aide to George W. Bush, said in an interview.
Most signals point to a healthy recovery
Holtz-Eakin is among the conservative economists arguing that Biden's stimulus has caused a stronger rise in inflation than expected. Indeed, popular gauges of price growth rose at the fastest pace since 2008 in May as rebounding demand ran up against dire supply shortages.
For now, the Federal Reserve and the Congressional Budget Office both expect inflation to weaken as shortages are addressed. And early signs point to price growth cooling into the summer.
Other signals are similarly encouraging. Wages are rising for workers in the leisure and hospitality sector, and Americans surveyed in a recent Gallup poll say they're the happiest they've ever been as vaccinations become more widespread and restrictions ease up.
Though most signs are good, experts are still urging caution given the huge hit absorbed by low-income workers, many of whom are Black and Hispanic.
"We should also remember that the road to recovery is long, even at this optimistic, faster timeline, it's still gonna be until the end of next year to get to pre-pandemic levels and there's gonna be a lot of people who are worse off," Konczal said.