Will Business Bounce Back Post-Pandemic? Historical Analysis and Outlook

As examined in previous articles, the coronavirus pandemic that ravaged the country at the beginning of the decade provided opportunities for certain businesses including debt services firms (consumer debt increased a decade-high 6% during 2020) and money transmitter companies (digital wallet services nearly doubled their customer base in the past 2 years); but overall economic impact has been negative. As of Q1 2021, a net loss of 9.5 million jobs from pre-pandemic job numbers has rendered nearly 10 million people unemployed, with nearly half of those considered “long-term unemployed.”1 All told, U.S. gross domestic product fell 3.5% in 2020, a number that could have been much worse but for an economy that was as volatile as it was depressed (GDP dropped 36% in Q1-Q2 2020 and rebounded 33% in Q3).2 Still, there are reasons - both historical and current - to be optimistic that a dazed, seesaw economy will regain growth and consistency.

During the Great Depression that began in 1929 and reached its depths in the 30s, the Dow Jones Industrial Average netted a loss of 89.2%. Caused by faulty stock valuations and flimsy “holding company” business structures, the crash left the stock market reeling – the Dow would not reach its pre-Depression numbers again until 1954, twenty-five years later.3 The U.S. government did little to assist failing businesses or rescue the stock market during the collapse; the crash was by all accounts allowed to run its course. Afterward, however, an aim at market stabilization prompted the passage of new regulations including the Glass Steagall Act which, along with the executive-driven “New Deal” that addressed unemployment and labor issues, put the country on the slow path to a recovery that wouldn’t be fully realized until the Second World War effort hoisted the economy out of the abyss at the tail end of the 1930s.

The Great Recession caused by the 2008 subprime mortgage crisis, while not as dire in retrospect as the Great Depression or indeed our most recent economic crisis, did witness a 5% GDP decline from peak to trough. Arising from mortgage delinquencies following the bursting of a housing bubble, the recession led to widespread foreclosures, the collapse of some major financial institutions, and a rise in unemployment to 10%. Unlike the government of the Great Depression, the government of the 2008 collapse was not inactive, quickly passing a $700 billion bailout for banks and a $787 billion economic stimulus package. Whether related directly to government action or no, the recession officially ended in Q2 2009, about a year and a half after the collapse event – certainly a more encouraging timeline than that of its 1929 forebear.

How are prospects for our current post-pandemic economic recovery? Most signs point to a strong and quick ascension from the stagnation that was thrust upon us in 2020. The U.S. imported a record $221 billion worth of goods in the first month of 2021 alone; unemployment currently sits at 5.8% (down from 14.8% in April 2020); and restless Americans with stimulus money in hand appear ready to take advantage of a summer out of quarantine. Moody’s Analytics expects Q2 2021 GDP to show a growth of 10%, with a total 2021 growth of 6.5%. Says CNBC per Moody’s, “In the past decade, there have been few quarters where gross domestic product grew at even 3%,” noting that the period of growth following the recession “could potentially remain stronger than it was during the pre-pandemic era into 2023.”4 Such indicators have U.S. business leaders feeling confident, according to a 2021 PwC US Pulse Survey that shows 51% feeling “somewhat optimistic” and 25% feeling “very optimistic” about US economic recovery this year and beyond.

The increasing willingness of the U.S. government to take action to mitigate the damage of economic crises may be evidence that economists and regulators are learning from past mistakes. It can at least be argued that the length of recessions has gotten shorter, certainly demonstrated by the recessions of the 20th and 21st centuries compared with those of the 19th century which nearly always dragged on for years. Further, it is hard to find proof historically of such zealous optimism for post-recession recovery as exists now among so many experts regarding the prospects of our own bounce-back. Now that consumers are being unleashed into the market with pent up demand after a year of anxiety and inactivity, it bears resurrecting the cliché that there is no better time to start a business.

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1 “Economic Outlook U.S. Q2 2021: Let The Good Times Roll”; https://www.spglobal.com/ratings/en/research/articles/210324-economic-research-for-the-u-s-let-the-good-times-roll-11887507; Mar 2021

2 “A year after the pandemic struck, the U.S. economy is still struggling but coming around quickly”; https://www.cnbc.com/2021/03/10/a-year-after-the-pandemic-struck-the-us-economy-is-still-struggling-but-coming-around-quickly.html; Mar 2021

3 “What Caused the Stock Market Crash of 1929?”; https://www.investopedia.com/ask/answers/042115/what-caused-stock-market-crash-1929-preceded-great-depression.asp#citation-3; Jan 2021

4 “The economy is on the cusp of a major boom and economists believe it could last”; https://www.cnbc.com/2021/04/09/the-economy-is-on-the-cusp-of-a-major-boom-and-economists-believe-it-could-last.html; Apr 2021