COVID-19 and the U.S. Economy

COVID-19 and the U.S. Economy

COVID-19 and the U.S. Economy
May 11, 2021
On June 8, 2020, the National Bureau of Economic Research (NBER) announced that the United
States entered into a recession in March 2020, a result of the Coronavirus Disease 2019 (COVID-
Lida R. Weinstock
19) pandemic. To prevent the spread of COVID-19, lockdown orders were issued in many parts
Analyst in Macroeconomic
of the country and travel restrictions were put in place. These measures, along with general fears
Policy
of the coronavirus, caused swift and large aggregate demand and supply s hocks that resulted in

the deepest economic downturn the United States has seen since the Great Depression.

In the post-World War II era, the peak unemployment rate of 14.7% in April 2020 was the
highest recorded monthly rate, and the second quarter annualized decline in gross domestic product (GDP) of 31.4%, driven
by decreases in personal consumption expenditures and gross private fixed investment, was the highest recorded single
quarterly decline in real GDP. The pandemic caused relatively low inflation in the aggregate, and prices for certain goods,
such as gasoline, decreased by double-digits. Although the economy has improved since the second quarter of 2020,
including the highest single quarterly increase in GDP (33.1% annualized) in the third quarter and the decline in
unemployment to 6.1% in April 2021, many economic indicators show that economic activity has still not fully recovered. In
some cases recovery appears to be slowing. When the public health crisis began, many workers were laid off on temporary
furloughs, but since then, many of those temporary job losses have become permanent, leading to concerns that
unemployment may remain elevated for several years.
Other indicators are harder to parse. The personal saving rate in the United States increased to a peak of 33.7% in April 2020
and remains elevated from pre-pandemic rates. Although a higher saving rate means lower consumption, which could hamper
growth in the short run, it could also translate to higher investment levels, which would contribute to long -run growth. Labor
productivity, a measure of labor efficiency, also increased in most major sectors in the beginning of the pandemic, which
would tend to positively affect short-run growth. This pattern is consistent with changes in productivity seen during
recessions since the 1980s. It is likely caused by employers’ ability to furlough or lay off their least efficient workers first,
resulting in a temporary increase in capital per remaining worker. Following this initial increase, labor productivity fell in
most sectors by the fourth quarter of 2020. Some longer-lasting changes could be possible for specific groups of individuals,
such as those who work for industries that have been hardest hit by the pandemic. Questions of changing consumer
preference and the potential for the saving rate to remain high could result in changing landscapes for many businesses and
for the nature of work itself.
Over the course of the pandemic, Congress approved six major laws—the Coronavirus Preparedness and Response
Supplemental Appropriations Act 2020 (P.L. 116-123); the Families First Coronavirus Response Act (P.L. 116-127); the
Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136); the Paycheck Protection Program and Health
Care Enhancement Act (P.L. 116-139); the Consolidated Appropriations Act, 2021 (P.L. 116-260); and the American Rescue
Plan Act of 2021 (P.L. 117-2)—to address the effects of COVID-19 and provide direct assistance to households and
businesses. In addition, the Federal Reserve lowered the federal funds rate (the overnight interbank lending rate), increased
asset purchases, revived and created new emergency credit facilities, and encouraged the use of the discount window. These
policies mitigated the decline in aggregate economic conditions in the short run. Of note, total personal income increased and
remains elevated from February 2020 levels. The three rounds of economic impact payments (sometimes referred to as
stimulus checks) greatly contributed to personal income in the first few months of the pandemic. In April 2020, January
2021, and March 2021, the payments made up more than 12%, 7%, and 16% of total personal income, respectively, and
contributed to increases in the level of total personal income. The overall increase in personal income was very large relative
to normal fluctuations in personal income, especially given the unprecedented decreases in employment and GDP in the wake
of COVID-19.
There have been some notable debates about potential adverse effects of pandemic-related legislation, including whether the
stimulus payments will cause inflation and whether they will add too much to the debt. The legislation is expected to boost
GDP in the short term, and the Federal Reserve projects that, in part due to the relief and stimulus, real GDP will increase by
6.5% in 2021. However, some are worried that the economy will grow too quickly and cause overheating. Inflation has
picked up in recent months but remains within target for the Federal Reserve’s goal of an average of 2%.

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Contents
Introduction ................................................................................................................... 1
Economic Indicators ........................................................................................................ 2
Employment and Unemployment ................................................................................. 2
Gross Domestic Product and Its Components ................................................................. 4
Saving ..................................................................................................................... 7
Productivity .............................................................................................................. 8
Inflation ................................................................................................................. 10
Policy Impact on the Economy ........................................................................................ 12
Enacted Policy ........................................................................................................ 12
Fiscal Policy Impact ........................................................................................... 12
Monetary Policy Impact ...................................................................................... 15
Debates About Stimulus ........................................................................................... 15
Future Economic Outlook .............................................................................................. 17
Economic Uncertainty .............................................................................................. 17
Potential Lasting Impacts.......................................................................................... 17

Figures
Figure 1. The (Un)employment Situation ............................................................................ 3
Figure 2. Duration of Unemployment ................................................................................. 4
Figure 3. Real Gross Domestic Product (GDP) .................................................................... 5
Figure 4. Personal Consumption Expenditures ..................................................................... 5
Figure 5. Gross Private Domestic Investment ...................................................................... 6
Figure 6. Net Exports of Goods and Services....................................................................... 7
Figure 7. Government Consumption Expenditures and Gross Investment................................. 7
Figure 8. Saving.............................................................................................................. 8
Figure 9. Major Sector Labor Productivity ........................................................................ 10
Figure 10. Consumer Price Index (CPI) Inflation ............................................................... 11
Figure 11. Price Changes of Selected Consumer Goods....................................................... 12
Figure 12. Estimated Effects of Pandemic-Related Legislation on Gross Domestic
Product ..................................................................................................................... 13
Figure 13. Effects of Selected Policies on Personal Income.................................................. 15

Contacts
Author Information ....................................................................................................... 19

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COVID-19 and the U.S. Economy

Introduction
On March 13, 2020, President Trump declared the Coronavirus Disease 2019 (COVID-19)
pandemic to be a national emergency.1 As COVID-19 spread across the country, businesses
closed, state lockdown orders were put in place, and social distancing measures were adopted in
an attempt to slow the spread of the disease. Economic activity skidded to a halt, resulting in a
rapid decrease in both employment and gross domestic product (GDP). On June 8, 2020, the
National Bureau of Economic Research (NBER) declared that economic activity had peaked in
February and a recession began in March 2020.2
Most recessions are caused by either an aggregate demand shock (a sudden change in the amount
of goods and services desired at a specific price point) or an aggregate supply shock (a sudden
change in the amount of goods and services sold at a specific price point), but the pandemic
caused problems to both aggregate demand and supply. COVID-19 caused a swift decline in
productive capacity and aggregate demand following the implementation of social distancing
measures and individual concerns about the spread of the virus.3 The unemployment rate
increased rapidly and consumer spending plummeted as individuals either lost income, ceased
patronizing in-person stores and restaurants, or both. As demand for certain goods and services
(such as gasoline as people began to telework at unprecedented rates) dropped, demand for others
rose quickly and supply chains could not meet that demand. Grocery stores experienced shortages
in food, toilet paper, and cleaning supplies and personal protective equipment became scarce.4
With time, some of these supply chains have corrected but problems continue to arise as the
public health crisis evolves. The combination of aggregate demand and aggregate supply
problems makes the economic dynamics of this recession unusual and the path of the recession
and recovery difficult to predict.
In response to the pandemic and resultant economic downturn, in March and April 2020,
Congress passed four laws to provide economic stimulus and assistance to the American people—
the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-
123); the Families First Coronavirus Response Act (P.L. 116-127); the Coronavirus Aid, Relief,
and Economic Security (CARES) Act (P.L. 116-136); and the Paycheck Protection Program and
Health Care Enhancement Act (P.L. 116-139). Additional relief and stimulus was enacted in
December 2020 and March 2021 in the Consolidated Appropriations Act, 2021 (P.L. 116-260),
and the American Rescue Plan Act of 2021 (P.L. 117-2), respectively. The rollout of vaccination
is underway, but in the meantime, some social distancing measures remain in place, and
economic activity is not expected to fully return to normal until the pandemic has sufficiently
subsided.
This report provides a synopsis of the economic conditions caused by the pandemic and the
theoretical context for how and why economic conditions deteriorated so rapidly in many cases.

1 President Donald J. T rump, Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus
Disease (COVID-19) Outbreak, T he White House, March 13, 2020, at https://www.whitehouse.gov/presidential-
actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.
2 National Bureau of Economic Research (NBER), “ Business Cycle Dating Committee Announcements,” at
https://www.nber.org/cycles/main.html.
3 Pedro Brinca, Joao B. Duarte, and Miguel Faria e Castro, Is the COVID-19 Pandemic a Supply or a Demand Shock?
Federal Reserve Bank of St. Louis, Economic Synopsis no. 31, May 20, 2020, at https://files.stlouisfed.org/research/
publications/economic-synopses/2020/05/20/is-the-covid-19-pandemic-a-supply-or-a-demand-shock.pdf.
4 Ana Swanson, “Global T rade Sputters, Leaving T oo Much Here, T oo Little T here,” The New York Times, April 10,
2020, at https://www.nytimes.com/2020/04/10/business/economy/global-trade-shortages-coronavirus.html.
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The report discusses the following economic indicators: employment and unemployment, GDP
and its components, saving, productivity, and inflation. The report then discusses the impacts of
fiscal and monetary policy on the economy, most specifical y on GDP and personal income.
Final y, the report closes with a discussion about the economic landscape moving forward and the
potential lasting impacts to the economy from both the pandemic and the recession.
Economic Indicators
The recession caused by COVID-19 is unprecedented in many ways. By many measures, this
recession is the deepest since the Great Depression. The peak unemployment rate of 14.7% in
April 2020 was the highest monthly rate recorded by the Bureau of Labor Statistics (BLS)5 since
1948 when the series started; the second quarter of 2020 annualized decline in gross domestic
product (GDP) of 31.4% was the highest single quarterly decline in real GDP recorded by the
Bureau of Economic Analysis (BEA) since that series started in 1947.6 The rate of decline in
economic activity was also very rapid—seemingly overnight states put lockdown orders into
effect, trade and travel were disrupted, and commerce screeched to a halt. The economy has
improved since the worst months of the second quarter of 2020 but is stil not fully recovered.
This section discusses key economic indicators and how the pandemic has affected them.
Employment and Unemployment
COVID-19 and the subsequent public health crisis led to precipitous increases in unemployment
and underemployment since March 2020. Figure 1 contrasts the official U3 unemployment
rate—unemployed workers as a percentage of the labor force—with the U6 rate, which also
includes those working part-time for economic reasons and discouraged workers (i.e., workers
who dropped out of the labor force for a labor market-related issue). The U3 rate reached a peak
of 14.7% in April 2020 and has fal en to 6.1% as of April 2021. The U6 rate followed a similar
pattern, rising to a high of 22.8% in April 2020 and fal ing each subsequent month, reaching
10.4% in April 2021.7 Both the U3 and U6 rates continue to be elevated as compared with pre-
pandemic rates, by 2.5 percentage points for U3 and 3.7 percentage points for U6.8 Although the
U6 is the broadest measure of labor underutilization, in this case it does not capture the full
effects of the pandemic on the labor force. While discouraged workers account for a portion of
the drop in the labor force, many parents (especial y women) have also been exiting the labor
force due to childcare needs, especial y given many schools are now virtual, or other care needs.9

5 Bureau of Labor Statistics (BLS), “ Labor Force Statistics from the Current Population Survey: Access to historical
data for the “ A” tables of the Employment Situation News Release,” at https://www.bls.gov/cps/cpsatabs.htm.
6 Bureau of Economic Analysis (BEA), “ National Data: National Income and Product Accounts,” at
https://apps.bea.gov/iT able/iT able.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey.
7 BLS, “Employment Situation Summary—April 2021,” news release, May 7, 2021, at https://www.bls.gov/
news.release/empsit.nr0.htm.
8 For further explanation of these rates, see CRS In Focus IF10443, Introduction to U.S. Economy: Unemployment, by
Lida R. Weinstock.
9 See, for example, Nicole Bateman and Martha Ross, “ Why Has COVID-19 Been Especially Harmful for Working
Women?” Brookings Institution, 19A: The Brookings Gender Equality Series, October 2020, at
https://www.brookings.edu/essay/why-has-covid-19-been-especially-harmful-for-working-women/; and Alisha
Haridasani Gupta, “Why Did Hundreds of T housands of Women Drop Out of the Work Force?” The New York Times,
October 3, 2020, at https://www.nytimes.com/2020/10/03/us/jobs-women-dropping-out-workforce-wage-gap-
gender.html.
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Analysis of changes in employed workers may offer additional, and in some situations more
stable,10 insights into the state of the labor force. The number of employed workers as a
percentage of the noninstitutionalized population decreased substantial y during the pandemic.
The employment-population ratio hit a low of 51.3% in April 2020 as compared with rates
consistently above 60% in the preceding year, and it has since risen to 57.9% in April 2021. In
terms of the number of people employed, as compared with pre-pandemic levels in February, the
number of employed persons fel by more than 25 mil ion in April 2020 but was down by roughly
7.6 mil ion by April 2021.11
Figure 1. The (Un)employment Situation

Source: Bureau of Labor Statistics (BLS).
Note: Seasonal y adjusted.
Although unemployment and employment-population rates have begun to recover from April
2020 lows, concerns stil exist about significant permanent job loss in the economy. When the
public health crisis began, many workers were laid off on temporary furloughs, but since then
many of those temporary job losses have become permanent.12 Assuming jobs return eventual y
after the pandemic subsides, this increase in permanent layoffs would be considered an increase
in cyclical unemployment—unemployment that is a result of the business cycle. However, if the
pandemic results in permanent changes to and job losses in some industries, the level of structural
unemployment—relatively long-lasting unemployment as a result of shifts in the economy—
could increase. Figure 2 il ustrates this phenomenon. In April 2020, due to the sudden closure of
many businesses, the percentage of individuals unemployed for less than five weeks increased.
Since the shock, the duration of unemployment has been increasing, with those unemployed for
more than 14 weeks accounting for over half of al unemployed individuals in October 2020. By
April 2021, the percentage of unemployed individuals who had been unemployed for 27 or more
weeks was a seasonal y adjusted 43.0%, up from 19.2% in February 2020, before the pandemic
began.13

10 For explanation of why unemployment rates may not be as accurate as normal, see CRS Insight IN11456, COVID-
19: Measuring Unem ploym ent, by Lida R. Weinstock.
11 BLS, “Employment Situation Summary—April 2021.”
12 For example, see Greg Iacurci, “Unemployment Was Supposed T o Be T emporary. Now, It’s Permanent for Almost 4
Million,” CNBC, October 13, 2020, at https://www.cnbc.com/2020/10/13/covid-related-unemployment-is-now-
permanent -for-almost-4-million.html.
13 BLS, “Access to Historical Data for the “A” T ables of the Employment Situation News Release,” May 7, 2021, at
https://www.bls.gov/cps/cpsatabs.htm.
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Figure 2. Duration of Unemployment

Source: BLS.
Gross Domestic Product and Its Components
Real gross domestic product (GDP)—economic output adjusted for inflation—fel at an annual
rate of 5.0% in the first quarter of 2020 and fel at an annual rate of 31.4% in the second quarter
of 2020, the largest quarterly decline on record.14 The decline was driven largely by decreases in
personal consumption expenditures and gross private fixed investment.15 Gross domestic
income—a paral el measure to GDP that measures al income derived from production, including
wages, profits, and taxes—fel by an annualized 2.5% in the first quarter and 33.5% in the second
quarter.16 GDP partial y recovered in the third quarter. BEA’s advance estimate17 of third quarter
2020 real GDP indicates that it rose at an annual rate of 33.1%, a historic gain, but stil a smal er-
dollar-magnitude gain than the second quarter 2020 dollar loss.18 Real GDP has recovered
significantly, but as of the first quarter of 2021, it is stil 0.9% lower than in the fourth quarter of
2019, before the pandemic began (see Figure 3).19

14 BEA, “ Gross Domestic Product (T hird Estimate), Corporate Profits (Revised), and GDP by Industry, Second Quarter
2020,” September 30, 2020, at https://www.bea.gov/news/2020/gross-domestic-product -third-estimate-corporate-
profits-revised-and-gdp-industry-annual.
15 For more information on the composition of GDP in the second quarter, see CRS Insight IN11478, Understanding
the Second-Quarter Fall in GDP, by Mark P. Keightley and Marc Labonte.
16 BEA, “ Gross Domestic Product (T hird Estimate), Corporate Profits (Revised), and GDP by Industry, Second Quarter
2020,” September 30, 2020, at https://www.bea.gov/news/2020/gross-domestic-product -third-estimate-corporate-
profits-revised-and-gdp-industry-annual.
17 An advance estimate is based on incomplete data and is subject to revision.
18 It is important to note that the 33.1% gain in GDP was not larger than the 31.4% fall in GDP in dollar terms. For
example, a 31.4% decrease in $100 would result in a $31.4 loss, leaving $68.6. A subsequent 33.1% increase in the
remaining $68.6 would result in a $22.7 increase, leaving only $91.3, a lower amount than what was started with.
19 BEA, “Gross Domestic Product, First Quarter 2021 (Advance Estimate),” April 29, 2021, at https://www.bea.gov/
sites/default/files/2021-04/gdp1q21_adv.pdf.
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Figure 3. Real Gross Domestic Product (GDP)

Source: Bureau of Economic Analysis (BEA).
Note: Data using bil ions of chained 2012 dol ars seasonal y adjusted at annual rates.
The below series of figures il ustrate the cumulative change in each major component of GDP—
personal consumption expenditures, gross private domestic investment, net exports of goods and
services, and government consumption expenditures and gross investment—since the fourth
quarter of 2019. A sharp decline and then rebound in personal consumption expenditures largely
drove both the decline and partial recovery of real GDP in 2020.
Figure 4 shows the breakdown of personal
Figure 4. Personal Consumption
consumption expenditures into expenditures
Expenditures
on goods—durable and nondurable—and
(cumulative change from Q4 2019)
services. The majority of the drop in total
personal consumption expenditures was due
to a decline in spending on services, which
decreased by a relatively smal amount in the
first quarter and then by a large amount in the
second quarter before increasing in the latter
half of 2020 and, most recently, in the first
quarter of 2021. The large impact on services
was likely a result of business closures, social
distancing, and other measures taken to limit
the spread of COVID-19. Spending on
nondurable goods (goods that are “single use”

or are consumed over a short period of time)
Source: CRS calculations based on Bureau of
Economic Analysis (BEA) data.
has behaved more pro-cyclical y than durable
Note: Underlying data chained to 2012 dol ars and
goods (goods that can be used over a long
seasonal y adjusted at annual rates.
period of time) in dollar terms during the
pandemic. This can be largely explained by
the nature of the public health crisis, which halted spending on certain nondurable goods, such as
gasoline for a car or new clothing, to such an extent that nondurable goods as a whole fel by
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COVID-19 and the U.S. Economy

more than durable goods did. Swift action by the Federal Reserve to lower interest rates and the
economic impact payments that went to a sizable portion of the population may have also helped
bolster spending on durable goods, which are typical y larger investments than nondurable goods,
and may have involved taking out a loan or otherwise paying in instal ments.
Figure 5 shows the breakdown of gross
private domestic investment by nonresidential
Figure 5. Gross Private Domestic
and residential fixed investment, and the
Investment
change in private inventories. Despite its
(cumulative change from Q4 2019)
smal share, change in private inventories
contributed significantly to the overal fal in
gross private domestic investment in the
second quarter but recovered to fourth quarter
2019 levels in the third quarter. When
COVID-19 first emerged, it led to disruptions
in supply chains, which were only further
exacerbated when the pandemic reached the
United States. Supply chain disruptions, along
with a sudden decrease in demand, caused
many producers to slow production and run

down inventories instead. GDP is based on
Source: CRS calculations based on Bureau of
new production, and therefore the large
Economic Analysis (BEA) data.
decrease in inventories contributed to the
Note: Underlying data chained to 2012 dol ars and
decline in annualized GDP in the second
seasonal y adjusted at annual rates.
quarter of 2020 by more than three percentage
points.20 Inventories increased significantly in the third quarter and even surpassed fourth quarter
2019 levels, but inventories decreased again in the first quarter of 2021. Decreases in equipment
investment, most notably transportation equipment, contributed to the decrease in nonresidential
fixed investment and decreases in new single-family housing investment led the decrease in
residential fixed investment in the second quarter of 2020.21 However, demand for housing has
remained strong during the pandemic, and starting in the third quarter of 2020, new single-family
housing investment increased, and residential fixed investment therefore picked up as wel and
remains elevated compared to fourth quarter 2019 levels.22
Neither net exports of goods and services nor government consumption expenditures and gross
investment contributed significantly to the fal in GDP. As shown in Figure 6, although both
exports and imports did drop significantly in the first and second quarters of 2020, they did so by
a fairly proportional amount, resulting in only a smal change to net exports (exports minus
imports). Both imports and exports picked back up starting in the third quarter of 2020 but, as of
the first quarter of 2021, are stil below pre-pandemic levels.

20 Justin Lahart, “Bullwhip Effect Could Boost U.S. Economy,” The Wall Street Journal, September 23, 2020, at
https://www.wsj.com/articles/bullwhip-effect -could-boost -u-s-economy-11600858980.
21 BEA, “ Gross Domestic Product (T hird Estimate), Corporate Profits (Revised), and GDP by Industry, Second Quarter
2020,” news release, September 30, 2020, at https://www.bea.gov/news/2020/gross-domestic-product -third-estimate-
corporate-profits-revised-and-gdp-industry-annual.
22 BEA, “Gross Domestic Product, First Quarter 2021 (Advance Estimate).”
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Figure 6. Net Exports of Goods and
Figure 7. Government Consumption
Services
Expenditures and Gross Investment
(cumulative change from Q4 2019)
(cumulative change from Q4 2019)

Source: CRS calculations based on Bureau of
Source: CRS calculations based on Bureau of
Economic Analysis (BEA) data.
Economic Analysis (BEA) data.
Note: Underlying data chained to 2012 dol ars
Note: Underlying data chained to 2012 dol ars
and seasonal y adjusted at annual rates.
and seasonal y adjusted at annual rates.
As il ustrated in Figure 7, government consumption expenditures and gross investment did
increase throughout the first half of 2020, in part owing to the stimulus measures enacted in
March and April that increased federal consumption expenditures, but decreases in state and local
expenditures somewhat offset this, resulting in a total 0.82% contribution to the change in real
GDP in the second quarter of 2020.23 Federal spending decreased from the second to third quarter
of 2020, in part because certain stimulus spending was completed. State and local spending fel
further in the third quarter of 2020, in part due to decreases in revenue necessitating spending cuts
in order to balance budgets. Both state and federal spending were up in the first quarter of 2021,
due, in part, to the additional legislation.
Saving
Consumer spending and saving are inversely related. Individuals receive a certain amount of
after-tax income that they can spend or save. By definition, what is not spent is saved. For this
reason, it follows that when personal consumption expenditures decreased as the coronavirus
spread, personal saving as a percentage of disposable income would increase, as evidenced by
Figure 8. As shown, the personal saving rate in the United States increased rapidly to 33.7% by
April 2020, fel through November 2020, and then rose in December 2020 and January 2021 and
rose again in March 2021. The personal saving rate remains elevated at 27.6% in March 2021 but
is stil below April 2020’s peak. Although personal saving has been on the rise since the financial
crisis of 2007-2009,24 the personal saving rate would likely increase during the pandemic for
several reasons, including cash hoarding, the inability to spend money due to business closures,
and increased personal income from various stimulus programs, notably the three rounds of
economic impact payments. An NBER working paper, in which the authors used a large-scale

23 BEA, “ National Data: National Income and Product Accounts,” at https://apps.bea.gov/iT able/iT able.cfm?reqid=19&
step=2&isuri=1&categories=survey.
24 E. Katarina Vermann, “Wait, Is Saving Good or Bad? T he Paradox of T hrift,” Economic Research Federal Reserve
Bank of St. Louis, May 2012, at https://research.stlouisfed.org/publications/page1-econ/2012/05/01/wait-is-saving-
good-or-bad-the-paradox-of-thrift/.
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survey of consumers, found that 33% of individuals reported mostly saving the first round
payment, and 52% used it to pay down debt, which would qualify as saving in the context of this
report.25 The Federal Reserve Bank of New York Survey of Consumer Expectations found that
respondents saved or expected to save 36.4% of the first round of stimulus, 37.1% of the second
round of stimulus, and 41.6% of the third round of stimulus.26 According to the Census
Household Pulse Survey for the period of March 17-29, 2021, for households that had received a
stimulus payment in the past seven days, roughly 32% reported mostly saving it.27
The inability to spend money due to business closures may be the primary reason for the spike in
the personal saving rate. Notably, most of the increase in saving appears to be due to high-income
households. According to an economic tracker based on private-sector data created by economists
to record the effects of COVID-19 in real-time, as of June 10, high-income households reduced
spending by 17% as compared with low-income households by only 4%.28
Figure 8 il ustrates quarterly net private saving, broken down by domestic businesses and
households and institutions. Net private saving, driven by household saving, increased and fel
during 2020 but stil remained higher than 2019 levels by the fourth quarter of 2020. Levels of
business saving decreased over the same period and, despite recovering somewhat in the third
quarter of 2020, remain depressed as of the first quarter of 2021, reflecting the cash-flow
problems that stil plague many industries as the coronavirus forces closures and reduces
activities, most notably in the retail and travel sectors.29
Figure 8. Saving

Source: BEA.
Note: Data seasonal y adjusted.
Productivity
Productivity measures the efficiency of production and is, therefore, an important indicator of
how wel the economy is running. There are two kinds of production inputs—labor and capital.

25 Olivier Coibion, Yuriy Gorodnichenko, and Michael Weber, How Did U.S. Consumers Use Their Stimulus
Paym ents? NBER, Working Paper no. 27693, August 2020, pp. 2-3.
26 Olivier Armantier et al., “An Update of How Households Are Using Stimulus Checks,” Liberty Street Economics,
April 7, 2021, at https://libertystreeteconomics.newyorkfed.org/2021/04/an-update-on-how-households-are-using-
stimulus-checks.html.
27 U.S. Census Bureau, Week 27 Household Pulse Survey: March 17-March 29, April 7, 2021, at
https://www.census.gov/data/tables/2021/demo/hhp/hhp27.html.
28 Raj Chetty et al., How Did COVID-19 and Stabilization Policies Affect Spending and Employment? A New Real-
Tim e Econom ic Tracker Based on Private Sector Data , NBER, Working Paper no. 27431, June 2020, p. 2.
29 BEA, “ National Income and Product Accounts,” at https://apps.bea.gov/iT able/index_nipa.cfm.
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Productivity is typical y measured by labor productivity or total factor productivity (sometimes
referred to as multifactor productivity, which is the productivity of al inputs combined). This
discussion focuses on the former. Figure 9 shows labor productivity in three major sectors before
and during the COVID-19 pandemic. Labor productivity, measured in output per hour, increased
in the business and nonfarm business sectors during the second quarter of 2020. Manufacturing
labor productivity decreased, likely a result of supply chain problems as described in previous
sections. Labor productivity increased across al three sectors in the third quarter, although the
increase was smal er than the second quarter increase for the business and nonfarm business
sectors. Business and nonfarm business productivity decreased in the fourth quarter.
Manufacturing productivity stil increased but by a lesser degree than in the third quarter.
That productivity would increase at al during a recession may seem counterintuitive, but labor
productivity has displayed countercyclical behavior for several decades. The mechanical
explanation for this is that, during recessions, output drops but hours worked drops by a greater
amount, resulting in an overal increase in output per hour. This is observable in the data; in the
third quarter of 2020 output remained 4.0% lower that it was in the fourth quarter of 2019 but
hours worked was an even greater 7.5% below the fourth quarter of 2019 level.30 More general y,
in a downturn, management can lay off low-skil ed or low-performing workers without reducing
output by a large margin. During a recession, as unemployment rises, capital per worker
increases, a concept known as capital deepening, and this, in turn, causes a short-term boost in
worker productivity.31 The boost in productivity appears to have been temporary, as might be
expected given the theory of capital deepening. In the fourth quarter of 2020 both business and
nonfarm business productivity fel . Al three sectors showed increased productivity in the first
quarter of 2021, a result of increases in both output and hour worked, with output increasing by a
larger magnitude.32 This report discusses the possibility of a more structural change to
productivity in a later section.

30 BLS, “Productivity and Costs, T hird Quarter 2020, Preliminary,” news release, November 5, 2020, at
https://www.bls.gov/news.release/prod2.nr0.htm.
31 See Robert J. Gordon, “T he Evolution of Okun’s Law and of Cyclical Productivity Fluctuations,” EES/IAB
Workshop, Labor Market Institutions and the Macreconomy, June 17 -18, 2011, pp. 29-34 at
http://economics.weinberg.northwestern.edu/robert -gordon/files/RescPapers/EvolutionOkunsLaw.pdf; and John G.
Fernald and J. Christina Wang, Why Has the Cyclicality of Productivity Changed? What Does It Mean? Federal
Reserve Bank of San Francisco, Working Paper no. 2016-7, April 2016, p. 5, at https://www.frbsf.org/economic-
research/files/wp2016-07.pdf.
32 BLS, “Productivity and Costs, First Quarter 2021, Preliminary,” news release, May 6, 2021, at https://www.bls.gov/
news.release/prod2.nr0.htm.
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Figure 9. Major Sector Labor Productivity

Source: BLS.
Inflation
There are a few comparable sources for measuring consumer price inflation in the United
States—the personal consumption expenditure (PCE) index, the GDP deflator, and the consumer
price index (CPI). Al of these indices measure how prices change over time across a series of
goods and services. Food and energy prices are typical y more volatile than other types of goods
and services, and as they often make up a large proportion of total spending, in some
circumstances fluctuations in food or energy prices can affect overal inflation in a way that is not
indicative of how other goods and services prices are behaving. For this reason, economists
calculate a version of inflation that does not include food or energy, known as core inflation.33
Measures of inflation that do include food and energy prices in calculations are often referred to
as measures of headline inflation.
Figure 10 shows the percentage change from a year ago in CPI headline and core inflation for
each month in 2020 through March 2021. PCE and GDP deflator methodologies differ slightly
from the CPI methodology but show largely similar patterns. As il ustrated below, core inflation
was more stable than headline inflation, in part due to the large decreases in fuel prices (see
Figure 11).34 The Federal Reserve has targeted an inflation rate of 2% in the past, although with
its recent change to its monetary policy strategy, it wil be targeting an average rate of 2% moving
forward.35 Given 2% as a guide, inflation during the pandemic would be considered low, although
headline CPI inflation did surpass 2% in March 2021.

33 For more information about inflation, see CRS In Focus IF10477, Introduction to U.S. Economy: Inflation, by Lida
R. Weinstock.
34 BLS, “Consumer Price Index (CPI) Databases,” at https://www.bls.gov/cpi/data.htm.
35 For more information about the Federal Reserve’s Monetary Policy Strategy Statement and the recent changes to it,
see CRS Insight IN11499, The Federal Reserve’s Revised Monetary Policy Strategy Statem ent, by Marc Labonte.
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Figure 10. Consumer Price Index (CPI) Inflation

Source: BLS.
In the aggregate, inflation has been low throughout the pandemic, but the price level of individual
goods has varied greatly. Because of the nature of the public health crisis, demand for certain
goods has increased significantly and demand for other goods has decreased significantly. Figure
11 shows the magnitude of some of these changes on a few selected consumer goods. Patterns of
the spread of COVID-19 and social distancing measures have limited the extent to which people
have been able to eat in restaurants and thus demand for food at home, a category that includes
groceries, has increased. As discussed in the “Introduction,” some supply chains could not meet
demand, as was the case for certain food products. Food at-home prices have been consistently
around 3-5% higher than they were in the same month of the previous year. Apparel saw an
opposite trend. Given fears of the virus and any potential consumer preference changes given the
state of the economy, increased telework, or other employment changes, demand for apparel
(clothing) fel , and with it apparel prices. A dramatic example of deflation (and inflation) comes
with motor fuel (gasoline) prices. A sudden decrease in travel and commuting caused demand for
fuel to drop and prices fel drastical y, over 33% lower in May 2020 than in May 2019.36 Since
then, fuel prices have general y risen and were 22.2% higher in March 2021 than in March 2020.

36 BLS, “Consumer Price Index (CPI) Databases,” at https://www.bls.gov/cpi/data.htm.
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Figure 11. Price Changes of Selected Consumer Goods

Source: BLS.
Policy Impact on the Economy
In response to the COVID-19 pandemic, the federal government implemented a wide range of
stimulus and liquidity measures. Congress passed, and the President signed, four major laws
between March and April 2020, another in December 2020, and a sixth in March 2021 to address
the effects of COVID-19 and provide direct assistance to households and businesses:
 Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020
(P.L. 116-123);
 Families First Coronavirus Response Act (P.L. 116-127);
 Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136);
 Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139);
 Consolidated Appropriations Act, 2021 (P.L. 116-260); and
 American Rescue Plan Act of 2021 (P.L. 117-2).
The Federal Reserve’s response included lowering the federal funds rate (the overnight interbank
lending rate), purchasing assets, reviving and creating new emergency credit facilities, and
encouraging use of the discount window.37
This section discusses the impacts of these policies.
Enacted Policy
Fiscal Policy Impact
The size and speed of the initial policy response to COVID-19 was historic in both nature and
proportion. While much uncertainty stil exists, it is clear that the policies enacted over the course

37 For more information on the Federal Reserve’s response to the COVID-19 pandemic, see CRS Report R46411, The
Federal Reserve’s Response to COVID-19: Policy Issues, by Marc Labonte.
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of the pandemic have had some positive effects on the economy. The Congressional Budget
Office (CBO) published a report on the potential short- and long-term effects of legislation
enacted in March and April 2020 on the domestic economy.38 In the short term, CBO projected
the policies enacted would increase real GDP by 4.7% and 3.1% in 2020 and 2021, respectively.
In the longer term, CBO expects the policies to increase the debt-to-GDP ratio, resulting in higher
borrowing costs, dampened GDP, and smal er national income, assuming no austerity measures
are taken.39 By 2023, CBO projected that GDP would be slightly smal er than if fiscal stimulus
had not been implemented. CBO calculates that the policies wil increase GDP by 58 cents for
every dollar they add to the deficit between 2020 and 2023.40 Figure 12 il ustrates the quarterly
impact of pandemic-related legislation on real GDP through 2021, as projected by CBO. The
largest impact occurs in the third quarter of this year and decreases in each subsequent quarter but
remains positive through 2021.41
Figure 12. Estimated Effects of Pandemic-Related Legislation on
Gross Domestic Product

Source: Congressional Budget Office (CBO).
Note: GDP not annualized.
The Consolidated Appropriations Act, 2021, and American Rescue Plan Act of 2021 are also
expected to boost GDP in the short term. When additional y accounting for this legislation, the
Federal Reserve projects that real GDP wil increase by 6.5% in 2021.42

38 CBO, The Effects of Pandemic-Related Legislation on Output, September 2020, at https://www.cbo.gov/system/files/
2020-09/56537-pandemic-legislation.pdf.
39 Austerity measures (actions taken to reduce the budget deficit, often through decreased gov ernment expenditures)
could result in lower levels of debt, and therefore lower borrowing costs, higher GDP, and larger national income in the
long-run, although in the short -term could cause further harm to GDP and related measures.
40 CBO, The Effects of Pandemic-Related Legislation on Output, September 2020.
41 Others have done analyses on the effects of specific legislation on the U.S. economy in the short - and long-term. For
example, a study from the Wharton School of the University of Pennsylvania found that the CARES Act would
“produce around 1.5 million additional jobs by 2020 Q3 and increase GDP by $812 billion over the next two years.”
For more detailed information on this analysis, see Alexander Arnon, Zheli He, and Jon Huntley, “Short -Run Economic
Effects of the CARES Act,” University of Pennsylvania, Penn Wharton Budget Model, April 8, 2020, at
https://budgetmodel.wharton.upenn.edu/issues/2020/4/8/short -run-effects-of-the-cares-act.
42 Board of Governors of the Federal Reserve System, Summary of Economic Projections, March 17, 2021, p. 2, at
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Figure 13 displays the effects of certain pandemic-related enacted provisions on personal income
as determined by BEA. The effects are measured as a percentage of total monthly personal
income.43 The economic impact payments had the largest single-month impact on personal
income of the programs analyzed. In April 2020, the payments constituted more than 12% of total
personal income and were largely responsible for the 12.2% increase in total personal income in
the same month. This overal increase in personal income was significant, especial y given the
unprecedented decreases in employment and GDP in the same month. Personal income in March
2021 remained higher than pre-pandemic levels. This increase and maintenance of levels of
personal income, in large part due to pandemic-related legislation, could be responsible for some
of the unusual phenomena happening during this recession, such as the maintenance of housing
demand and the smal er than usual drop in durable goods spending.
Most of the first round of one-time payments were made in April 2020, and therefore the effects
on personal income dropped off very quickly—total personal income fel 4.2% and 1.2% in May
and June 2020, respectively. The enhanced unemployment benefits each month also contributed
significantly to personal income—over 5% in May, June, and July 2020, at which point the
provision for the additional $600 per week expired, likely contributing to a 2.7% drop in total
personal income in August 2020.44 Of note, this 5% represents the effect on total personal
income; for those unemployed individuals actual y receiving the benefits, this percentage wil be
much higher because their incomes would be lower than average. Other programs such as the
Paycheck Protection Program contributed relatively less to total personal income but would also
have much larger effects for those individuals directly receiving the benefits. Despite the amount
being lowered, enhanced unemployment benefits have stil contributed significantly to personal
income since July 2020, general y between 1% and 2%. As can be seen in Figure 13, the second
and third round of economic impact payments also constituted a large share of personal income in
January 2021 (7.7%) and March 2021 (16.7%). As with the first round payment, the bulk of
payments were delivered in one month, and therefore it is possible that personal income wil fal
after March 2021.

https://www.federalreserve.gov/moneteraypolicy/file/fomcprojtabl20210317.pdf.
43 For example, if total personal income in a given month was $100 and a specific program contributed $10 to total
personal income in that month, that program would constitute 10% of to tal personal income.
44 BEA, “ Effects of Selected Federal Pandemic Response Programs on Personal Income, September 2020,” table,
October 30, 2020, at https://www.bea.gov/sites/default/files/2020-10/effects-of-selected-federal-pandemic-response-
programs-on-personal-income-september-2020.pdf; and BEA, “ Personal Income and Outlays,” news release, August
2020, October 1, 2020, at https://www.bea.gov/news/2020/personal-income-and-outlays-august -2020.
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Figure 13. Effects of Selected Policies on Personal Income

Source: CRS calculations using BEA data.
Notes: Underlying data seasonal y adjusted at annual rates. Data subject to revision. NPISH stands for nonprofit
institutions serving households.
Monetary Policy Impact
The CBO report cited above includes a brief analysis of the impact of the Federal Reserve’s
emergency lending facilities on GDP.45 CBO estimates the lending facilities wil increase real
GDP by 0.1% and 0.3% in 2020 and 2021, respectively. The budgetary costs to the Federal
Reserve are expected to be offset by interest income generated by the programs. More general y,
CBO determined that the lending facilities should increase confidence and provide a more stable
and favorable lending environment, thereby increasing “overal demand by supporting
businesses’ and consumers’ spending, helping increase businesses’ chance of survival, and
preserving production capacity, al of which wil help expedite a recovery.”46 The emergency
lending facilities backed by CARES Act funds expired at the end of 2020, and the Consolidated
Appropriations Act, 2021, prohibited the Fed from reopening CARES Act programs for corporate
bonds, municipal debt, and the Main Street Lending Program.47
Debates About Stimulus
The economic downturn caused by COVID-19 is unusual in that many aspects of dampened
demand have been caused by the nature of the public health crisis as opposed to a problem with

45 CBO, The Effects of Pandemic-Related Legislation on Output, September 2020.
46 CBO, The Effects of Pandemic-Related Legislation on Output, September 2020.
47 For more information about the Federal Reserve’s policy response to the pandemic and the expiration of some of
these programs, see CRS Report R46411, The Federal Reserve’s Response to COVID-19: Policy Issues, by Marc
Labonte.
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economic or financial fundamentals. As such, it is possible that aggregate demand wil rebound
quickly once the health crisis comes to an end. In this way, the current situation may differ from
past recessions, and the need for stimulus may diminish quickly. However, the longer the
pandemic persists, the more likely there are to be lasting impacts that could affect aggregate
demand and supply even once the crisis has passed. Given the uneven nature of the impacts of
COVID-19, it might further be expected that the recovery wil be uneven, which could also result
in the need for additional targeted stimulus.
No consensus exists in economic or policy communities regarding how long or how much
stimulus is appropriate as it relates to recessions general y or COVID-19 specifical y. One might
look to past fiscal stimulus to help answer these sorts of queries, but economists continue to
debate the efficacy and timing of past stimulus. For example, there is debate within the economic
community about the effectiveness of the fiscal response to the 2007-2009 recession, with one of
the concerns being that stimulus was removed too soon.48
As it relates to COVID-19, many economists are concerned about the growing debt and
historical y large debt-to-GDP ratio. However, many also believe that stimulus should not be
withdrawn until the crisis is over and the economy is fully recovered.49 Others believe that
stimulus should be eased and deficit-reduction measures put in place sooner rather than later.50
Stil others argue that stimulus should have already been removed and that short-term gains based
on deficit spending wil hurt longer-term growth and stability as future generations are forced to
pay for the economic decisions of today.51
One of the largest concerns raised about pandemic-related legislation is inflation. The Fed
projects that inflation wil rise modestly to 2.4% in 2021 but decrease to 2% in the longer run.52
However, some economists believe that after past legislation, the funding provided in the
American Rescue Plan Act of 2021 is too large and wil result in an overheating economy and a
larger temporary or sustained increase in inflation.53 Inflation did rise above 2% in March 2021,
but at this point, it is not clear that higher inflation wil be sustained.54

48 Gerald A. Carlino, Did the Fiscal Stimulus Work?, Federal Reserve Bank of Philadelphia, Economic Insights, vol. 2,
no. 1 (First Quarter 2018), pp. 6-16.
49 For example, see Committee for a Responsible Federal Budget, “Policymakers Should Avoid Austerity in
Addressing the Debt,” November 25, 2020, at http://www.crfb.org/blogs/policymakers-should-avoid-austerity-
addressing-debt; and Richard Kogan and Paul N. Van De Water, Rising Federal Debt Should Not Shortchange
Response to COVID-19 Crisis, Center on Budget and Policy Priorities, September 9, 2020, at https://www.cbpp.org/
research/federal-budget/rising-federal-debt-should-not-shortchange-response-to-covid-19-crisis.
50 For example, see Sita Slavov and Alan Viard, “Sound the Alarm on the Federal Debt,” The Hill, November 23, 2020,
at https://thehill.com/opinion/finance/527146-sound-the-alarm-on-the-federal-debt?rl=1.
51 Veronique de Rugy, As Bastiat Would Say, Peer Past the Obvious with Pandemic Policies, Mercatus Center, July 2,
2020, at https://www.mercatus.org/commentary/bastiat-would-say-peer-past-obvious-pandemic-policies.
52 Board of Governors of the Federal Reserve System, Summary of Economic Projections, March 17, 2021, p. 2.
53 For example, see Olivier Blanchard, In Defense of Concerns over the $1.9 Trillion Relief Plan, Peterson Institute for
International Economics, February 18, 2021, at https://www.piie.com/blogs/realtime-economic-issues-watch/defense-
concerns-over-19-trillion-relief-plan; and Lawrence H. Summers, “ Opinion: T he Biden Stimulus Is Admirably
Ambitious. But It Brings Some Big Risks, T oo,” Washington Post, February 4, 2021, at
https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/.
54 For more information about the future path of inflation, see CRS Insight IN11644, Is High Inflation a Risk in 2021?
by Mark P. Keightley, Marc Labonte, and Lida R. Weinstock .
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Future Economic Outlook
Economic Uncertainty
Although the economy has begun to recover from the effects of the COVID-19 pandemic, how
long it wil take for the economy to fully recover is uncertain. GDP and unemployment improved
in the latter half of 2020 but stil remained depressed and elevated, respectively, from prior to the
pandemic. The recovery has also slowed somewhat since the third quarter of 2020—real GDP
rose by a historic annualized 33.4% in the third quarter of 2020, 4.3% in the fourth quarter of
2020, and 6.4% in the first quarter of 2021.55 Unemployment fel to 6.9% in October 2020 from a
high of 14.8% in April 2020 but has fal en only to 6.1% as of April 2021.56 To a large extent, the
economy is unlikely to fully recover until the pandemic has ended. Therefore, economic activity
may depend on factors such as when most of the U.S. population wil be vaccinated, how
effective the vaccine is against new variants, or other advances in treatment. In this case,
forecasting when employment wil recover may be difficult. Yet current projections suggest
possible long-run economic impacts. CBO forecasts, as of February 2021, that real GDP wil
remain below its potential until 2025 and the unemployment rate wil remain elevated for several
years, dropping below 5% by 2023 and below 4% by 2026.57 The forecast assumes no policy
changes (and therefore does not take the American Rescue Plan Act of 2021 into account) and is
subject to change. Other forecasts are more optimistic about the rate of recovery.58
Once the public health crisis has passed, it is possible that the economy will recover at a relatively
fast pace, as compared with other recessions. Normal y, aggregate demand remains depressed and
the economy could take several years to return to full employment after a recession. The current
recession is different than past recessions in that it was caused not by an inherently economic or
financial shock but by a public health crisis. Given that the macro-fundamentals prior to the
pandemic appeared to be sound, once the cause of the recession has passed, it might be assumed
that the economy can return to normal quickly. However, the longer the pandemic and resulting
recession last, the more likely certain effects are to be longer lasting as wel .
Potential Lasting Impacts
The depth and uncertainty of the COVID-19 pandemic and resultant recession have created
speculation about potential long-lasting impacts to the economy. It is difficult to speculate about
what lasting impacts there might be. To some extent, this wil be driven by the length of the
pandemic and any structural reforms the federal government might enact in response to the nature
of the crisis. Although speculation as to the permanence of any effect is difficult, there is some
research about the economic effects of prior pandemics (most notably the Spanish Flu of 1918)
that could be of some use in helping frame possible economic hurdles in the coming years. For
example, anecdotal evidence from the 1918 pandemic indicate that reduced investment in human
capital could be a long-term problem because of any lasting morbidity among survivors and any
long-run pressure that might be put on health care and government assistance programs.

55 BEA, “Gross Domestic Product, First Quarter 2021 (Advance Estimate).”
56 BLS, The Employment Situation—April 2021, May 7, 2021, at https://www.bls.gov/news.release/empsit.nr0.htm.
57 CBO, An Overview of the Budget and Economic Outlook: 2021-2031, February 1, 2021, at https://www.cbo.gov/
publication/56965.
58 For example, see Board of Governors of the Federal Reserve System, FOMC Economic Projections, March 17, 2021,
at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf.
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However, the policy response to COVID-19 wil likely result in a more positive outcome than the
policy response in 1918 did.59
As discussed previously, unemployment may take a long time to reach pre-pandemic rates and
GDP may take a long time to reach potential GDP, but both are expected to happen eventual y. In
the aggregate, the economy may fully recover, but there could be longer-lasting impacts for
specific groups of individuals. These groups may include those who work for industries that have
been hit hardest by the pandemic and may face higher and longer rates of unemployment,60
individuals from geographical areas that suffered large losses (both of lives and businesses), or
low-income individuals that could not bear the costs of the recession as easily as others. Some
have forecasted a “K-shaped” recovery, meaning that some groups of individuals and businesses
wil recover quickly, but the economic situation for others wil worsen and take much longer to
recover, if ever. For example, telework is possible in certain industries and has al owed work to
continue largely uninterrupted, whereas other industries require face-to-face services and have
been struggling due to decreased demand. If consumer preferences change as a result of the
pandemic, this could mean a changing landscape for businesses. For example, if enough
individuals get used to cooking at home and eating out less, this could mean fewer restaurants
wil exist in the future. Questions of consumer preferences and unemployment rates cannot be
answered until there are data on consumer behavior after the pandemic has ended.
In addition, further speculation exists about permanent changes to consumer behavior in the form
of the personal saving rate, which has increased during the pandemic. A permanent increase,
which cannot be predicted with accuracy at this stage, would dampen the recovery in the short
term, but might be a net positive for the economy in the long run.
Another area that has seen much media speculation is changes to the nature of work. Given the
overal increase in productivity and the switch to work-from-home for many industries, some
speculate that these changes may be at least partial y permanent and that there wil be an increase
in telework opportunities.61 It is, however, not necessarily evident that the increase in productivity
is a direct result of telework, and it is likely that some amount of innovation in the economy has
been spurred out of necessity (e.g., research and development for a vaccine) and that innovation
and then productivity may decrease once the crisis has passed. Changing norms and preferences
towards more telework could stil cause an increase in telework opportunities, even if telework
turns out to be similarly or less productive than on-site work. Some prominent companies,
notably Twitter, have even already made the announcement that they wil provide the ability to
telework permanently.62 Such a change at a large scale would have wide-ranging implications for
a variety of factors, including office space, transportation networks, IT services, and housing
preferences. However, it is difficult to predict whether this type of action wil be widespread; for
al the ardent supporters of this type of change, there are also detractors, and for the change to be

59 Vellore Arthi and John Parman, Disease, Downturns, and Wellbeing: Economic History and the Long-Run Impacts
of COVID-19, NBER, Working Paper no. 27805, September 2020, pp. 2, 23 -24, at https://www.nber.org/papers/
w27805.pdf.
60 For more information on industries most impacted by COVID-19 in terms of employment, see CRS Insight IN11564,
COVID-19: Em ploym ent Across Industries, by Lida R. Weinstock.
61 Katherine Guyot and Isabel V. Sawhill, Telecommuting Will Likely Continue Long After the Pandemic, Brookings
Institution, T ime and the Middle Class Series, April 6, 2020, at https://www.brookings.edu/blog/up-front/2020/04/06/
telecommuting-will-likely-continue-long-after-the-pandemic/.
62 Jessica Guynn, “How Would You Like to Work from Home ‘Forever’? T witter Is Encouraging Employees to Do
So,” USA Today, May 12, 2020, at https://www.usatoday.com/story/tech/2020/05/12/twitter-work-from-home-forever/
3118879001/.
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widespread across industries, considerable structural changes and technological improvements
would need to be made.63

Author Information

Lida R. Weinstock

Analyst in Macroeconomic Policy

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

63 Organisation for Economic Cooperation and Development (OECD), “Productivity Gains from T eleworking in the
Post COVID-19 Era: How Can Public Policies Make It Happen?” OECD Policy Responses to Coronavirus, September
7, 2020, at https://www.oecd.org/coronavirus/policy-responses/productivity-gains-from-teleworking-in-the-post-covid-
19-era-a5d52e99/.
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