In recent decades, however, booms have become less frequent. Growth never took off after the mild recession that hit in 2001, and while the unemployment rate hit a half-century low after the last recession, it took a decade to get there.
There is reason to believe that this recovery could be different. On the one hand, the economy was fundamentally healthy at the start of the recession. There was no real estate bubble; household debt was low; banks weren’t sitting on a tower of bad loans that could collapse at any moment. This means that there is no reason, at least in theory, that the economy cannot pick up more or less where it left off.
Policymakers have also reacted much more aggressively to this crisis than in previous ones. The Fed acted quickly to prevent the pandemic from triggering a financial crisis. Congress has spent billions of dollars to make sure the unemployed can keep their homes and feed their families, and to help small businesses.
These efforts were far from total success. The unemployment system collapsed under the crushing of applicants, and millions of people had to wait weeks or months for benefits, if they had any. Government assistance has been insufficient or arrived too late to save thousands of businesses. State and local governments have cut jobs. Hunger rates have increased.
But government assistance appears to have been largely effective in preventing deep structural damage that could prevent a strong rebound. There has been no wave of business foreclosures or bankruptcies. Entrepreneurship rates have skyrocketed, signaling that Americans are optimistic and have access to the capital necessary to act on that optimism.
Even if there is a strong rebound, economists warn that not everyone will benefit.
Kara Gray and her husband, Christopher DeSure, have spent years building their small Ohio construction business into a successful one. Then the pandemic shut them down, and having a daughter at home with a weakened immune system, they didn’t feel comfortable returning to work in person.
With a strong housing market, Gray is confident they can get back to work once the pandemic is over. But she fears they may not be able to take full advantage of the boom. She and her husband were forced to spend the money they had set aside to buy a house, and fell behind on bills and racked up credit card debt. This could make it difficult for them to qualify for a mortgage or a business loan to grow their business.