July 2020 National Economic Outlook

Economy Has Picked Up, But Level of Activity Is Still Far Below Pre-Pandemic Level

Executive Summary

Economic activity in the United States has picked up from its low in April, but remains well below its February, pre-recession level. Consumer spending, homebuilding, home sales, and industrial production are all up over the past couple of months. However, increasing cases of coronavirus in recent weeks could become a drag on the economy.

Most importantly, the United States added a record 4.8 million jobs in June, confirmation that the economy has started to recover from the Viral Recession. This was the most jobs added in a single month in the history of the series, going back to 1939. The previous record was in May 2020, when the economy added 2.70 million jobs according to the survey of employers (revised up from 2.51 million). 

While the economy has added an astounding 7.5 million jobs over the past two months, it lost almost 22.2 million jobs in March and April combined (April’s job losses were revised lower to 20.8 million, still the worst month on record by far). The economy has recovered only about one-third of the job lost over those two months; thus employment is still down by 14.7 million, or 9.6 percent, from its February peak. 

The unemployment rate dropped to 11.1 percent in June, from 13.3 percent in May and 14.7 percent in April, which was by far the highest rate since the Great Depression. The rapid decline in the unemployment rate over the past two months has been unprecedented, but the rate is still far above its 3.5 percent level in early 2020. It is also above the previous post-World War II high of 10.8 percent in 1982, and the 10.0 percent peak during the Great Recession a decade ago.

According to the Federal Reserve’s Beige Book, covering activity in the six weeks through July 6, economic activity was picking up through most of the country, but it “remained well below where it was prior to the COVID-19 pandemic.” 

Areas of improvement included consumer spending, manufacturing, professional and business services, transportation, and home sales.

  • Construction was still weak, but had picked up in some parts of the country.
  • Commercial real estate activity was still “at a low level.” 
  • There was further contraction in the energy sector due to “limited demand and oversupply.”
  • The agricultural sector was weak.

There was still a huge amount of uncertainty about near-term conditions, “as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications.”

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July National Economic Outlook

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