After Covid: Will the Recession Become a Depression?

Photograph by Nathaniel St. Clair

In April 2020, Jamie Dimond, CEO of JP Morgan Chase, noted in the company’s 2019 annual report: “As a nation, we were clearly not equipped for this global pandemic, and the consequences have been devastating.” Like a Wall Street preacher, he added, “But it is forcing us to work together, and it is improving civility and reminding us that we all live on one planet.”

In June, the National Bureau of Economic Research, a private forecasting group, reported that the “peak in quarterly economic activity occurred in 2019-Q4.” It noted:

The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.

It then warned that a recession had begun in February 2020, just around the time the first wave of the Covid-19 pandemic struck – and a month before Diamond warned about the “pandemic.” It reported:

A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide indicators of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

The unstated question at the heart of Diamond lamentation was whether his reference to a “pandemic” applied only to the virus or to the deeper economic and social crisis beginning to grip the country?

Grasping for straws, Pres. Trump tweeted on June 8th: “Big day for Stock Market. Smart money, and the World, know that we are heading in the right direction. Jobs are coming back FAST. Next year will be our greatest ever.”

For Trump, ignorance is bliss whether confronting a virus or a stumbling economy.


On October 6th, Jerome Powell, Chair, Federal Reserve, offered a very pessimistic assessment of the status of the economy in a presentation, Recent Economic Developments and the Challenges Ahead. He noted:

… a prolonged slowing in the pace of improvement over time could trigger typical recessionary dynamics, as weakness feeds on weakness. A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy. That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.

He went on, despairing:

… Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.

Drilling another nail in the proverbial economic coffin, Pres. Trump initially pulled the plug on the on-again/off-again negotiations between Sec. of the Treasure Steven Mnuchin and House Speaker Nancy Pelosi over a new economic aid package to respond to the coronavirus. Pelosi had initially proposed a $3 trillion bailout plan but then reduced it to $1 trillion hoping to push through a compromise by the November 3rd election.

Trump tweeted:

We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their …

.. request, and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business. …

The outcome of the failure to even provide band-aide relief for the growing numbers of Americans suffering from the combined pandemic and recession would be a long, cold winter.

In the face of Powell’s report and mounting criticism, including from Republicans, Trump executed a backflip and tweeting the following:

If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?

Sadly, even if the political dance is resolved and a follow-up recovery plan is implemented, the long-term economic consequences of Covid-19 pandemic cannot be fully anticipated. A recent study by two Harvard economists paint a grim picture of total costs of the pandemic. “The total cost is estimated at more than $16 trillion, or approximately 90% of the annual gross domestic product of the US,” David Cutler and Lawrence Summers wrote. “Approximately half of this amount is the lost income from the COVID-19–induced recession; the remainder is the economic effects of shorter and less healthy life.”

And so, the ping-pong of American politics plays on.


Six months earlier, on April 27, 2020, Trump stood near a sign that read “Opening up America again” and announced his plan to reopen the nation’s economy in the face of the mounting coronavirus epidemic. “Every day it gets better,” he proclaimed. “We are continuing to rapidly expand our capacity and confident that we have enough testing to begin reopening and the reopening process. We want to get our country open. And the testing is not going to be a problem at all. In fact it’s going to be one of the great assets that we have.”

At the time Trump made his proclamation, the number of confirmed cases of Covid-19 was near 1 million and about 55,000 people had died. Now, in mid-October, confirmed coronavirus cases are at 8.1 million and 219,00 people have died. Efforts promoted by both the Trump administration and nearly all the states to “open up” the economy have proven not only less than successful economically but disastrous in terms of the pandemic’s spreading.

Nevertheless, the White House, along with thinktanks, news organizations and state governments, have joined a growing chorus offering analyses and plans to illuminate post-pandemic possibilities. The White House’s March 2020 Executive Order, “Coronavirus (COVID-19) Pandemic: Response and Recovery Through Federal-State-Local-Tribal Partnership,” laid out its arms-length strategy: “Response and recovery efforts are locally executed, state managed, and federally supported.”

Reuters warned, “A month into efforts to broadly reopen the U.S. economy there is little clarity either on the pace and durability of the recovery ….” Scholars at the Brookings Institute laid out a half-dozen scenarios dubbed “the shape of the recovery: Z-shaped, V-shaped, U-shaped, W-shaped, L-shaped, and even the Nike Swoosh.” However, the authors warned, “So, there will likely be no quick recovery. A key question is whether damage to the economy’s capacity to produce goods and services will be long lasting.”

The management consulting firm, McKinsey & Company, cautioned: “Recovery from a deep crisis can be uneven, and history suggests that leaders may want to pace their policies over several years.” It poses a series of revealing questions:

Will your city be known for its unparalleled business environment for small and medium-size businesses looking to digitize and expand? Can your state become a top tourist destination? Or will workers in your locality be so successfully reskilled that it will lead the way toward inclusive growth?

It concluded, “The answer to these questions will determine the shape of the ‘next normal.’”

What if the various speculations as to the possible Covid-19 recovery lead to something other than a next normal? What if recovery portends a deeper, sadder possibility?


The unasked question is scary if simple: What if, after the coronavirus pandemic is contained, the economy takes much longer to recover, and social stagnation drags on? What if the recovery is a not a stepping-stone forward to a promising “next normal” but a step backward? What if America’s great ideological glue – the belief in opportunity – is frozen into a postmodern system of social relations with ever-decreasing economic mobility, one of deepening inequality?

The modern system of social inequality was forged during the Gilded Age of the late-19th century. In 1897, the richest 4,000 families in the U.S. — who representing less than 1 percent of the population — had about as much wealth as the other 11.6 million families all together. In comparison, by November 2017, the top 1 percent held 38.6 percent of the nation’s wealth. Today, deepening inequality is recasting the lives of ordinary Americans fostering what historian David Huyssen identifies as the “Second Gilded Age.”

In a telling study published in the Review of Political Economy,The Financial Crisis of 1929 Reexamined: The Role of Soaring Inequality,” Jon D. Wisman argued that “the Great Depression can be understood as the result of wage stagnation and exploding inequality during the 1920s.”

Wisman identified three factors that contributed to the Depression’s duration. First, consumption declined leading to “a fall in household saving, and increased household indebtedness.” Second, “greater inequality” led to “reduced household saving, greater household debt, and possibly longer work hours.” And, third, “as the rich took larger shares of income and wealth, they gained relatively more command over everything, including ideology.”

Symptoms of an economic and social crisis are mounting. As of August, the unemployment rate was at 8.4 percent, while far less than the 14.7 percent in April when Covid-19 first took its toll, it is double the 4.4 percent in February. Homeless is increasing; HUD reports that as of January 2019 the national homeless level reached 567,715 people and some project that, by January 2021, could increase by 40-45 percent possibly reaching 800,000 due sustained unemployment and the coming wave of evictions.

These factors are compounded by the burden of debt; the Federal Reserve of New York estimates that total household debt for the first quarter of 2020 hit $14.3 trillion, up from $12.7 trillion in the third quarter of 2008. Personal debt includes (i) household mortgages and (ii) non-housing debt (e.g., student debt, auto loans, credit cards). Deepening despair is leading alcohol abuse, drug overdoses and increases suicides. Sadly, the lifespan of the average American is declining, and the death rate is increasing.

In a 2016 publication, “What We Know About Economic Inequality and Social Mobility in the United States,” the Russell Sage Foundation (RSF) identifies some of the profound changes that, over the last half-century, have eroded notions of the American Dream. It concludes on a very pessimistic note:

The rise in economic inequality over the past four decades calls into question the notion that anyone, regardless of the status of their parents, can achieve the American Dream. Recent studies imply that America is a less mobile society than in the past and confirm that the U.S. has less social mobility than comparable industrialized nations.

What if ever-deepening economic inequality comes to define the New Gilded Age?

This possibility is anticipated by Harvard’s Raj Chetty, of the Opportunities Insights group, who recently wrote, “our research shows that children’s chances of earning more than their parents have been declining. 90% of children born in 1940 grew up to earn more than their parents.” He concludes, “Today, only half of all children earn more than their parents did.”

No one knows when Covid-19 will finally be contained. One consensus suggests that a proven vaccine will likely be available and dispensed in the U.S. by the end of 2021. Moody’s Sophia Koropeckyj estimates that 5 million people will struggle to find work even after the virus has been controlled and that the recovery from the current recession, the “new normal,” won’t happen until 2023 or 2024.

More ominous, a greater economically structured and unequal system – a postmodern caste system — may come to define the next new normal. No matter whether Trump or Biden is elected the next president, a far deeper crisis may await the nation. As is becoming increasingly evident, only a truly popular and democratic social restructuring of the economy and the political order can address the structural crisis the nation faces.

David Rosen is the author of Sex, Sin & Subversion:  The Transformation of 1950s New York’s Forbidden into America’s New Normal (Skyhorse, 2015).  He can be reached at; check out