INDUSTRY RESEARCH

Views on the Pandemic as its impact fades

Examining the latest state and lingering economic effects of COVID-19

Starting last March (2020), lockdowns of various types were extended across the world in response to the exponential spread of a novel coronavirus, SARS-CoV-2. COVID-19’s impact dominated headlines in 2020, separating individuals from loved ones, friends, and coworkers, greatly disrupting commerce and forcing all individuals to alter life-learned behaviors with respect to social distancing.

Whether measured by case number or by fatalities, the cumulative effects of COVID were profound. Worldwide, over 120 million cumulative cases have been reported, with over 2.6 million related deaths. As illustrated by Johns Hopkins in late March, the pandemic had touched the world over, with cases especially prominent in some of the world’s most economically advanced countries.

Now, as we enter into the 2nd quarter of 2021, populations around the world are finally being served with vaccines that promise to break them free from the tentacles of COVID. As we release this document (March 2021), new cases of COVID-19 are in decline, and the US is racing to vaccinate its population. The graphic below (also from Johns Hopkins) demonstrates how COVID cases have trended from the start of 2020 through mid-March for each individual state. States appearing in shades of orange have experienced a growth in new cases over the past two weeks. States appearing in shades of green have seen declines. The intensity of the colors indicates the scale of growth or decline with new cases; the darker the shade, the bigger the change. While a few states have declined sporadically, the prevalence of COVID across most of the US has been dropping precipitously.

On reflection, COVID most profound economic disruption occurred in 2nd quarter 2020. A striking aspect of COVID’s effect, though, was how it varied greatly by economic sector. As illustrated by McKinsey using data from the Department of Labor, Bureau of Economic Analysis, companies within the F&I (finance and insurance) space, construction and retail industries lost steam relative to their measures of 2019, but relatively much less than the losses suffered in the Hospitality, Entertainment and Recreation industries, whose GDP dropped nearly 50% for the quarter.

Using additional data from the Bureau of Economic Analysis, Sextant’s chart reinforces how labor rates shifted year over year from the 3 months preceding the onset of COVID in comparison to the equivalent 3 months running December 2020 through February 2021.