Last week the Bureau of Labor Statistics released that the unemployment rate has jumped to 14.7%. This number is predicted to be higher next month. This rate indicates how many families are undergoing financial hardships as a result of COVID-19. Although the unemployment rate is terrifyingly high, it is important not to exaggerate. Many are comparing today's economy to the Great Depression. Many experts are making statements to show that this isn't true. Josh Zumbrun, stated:
“News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression…the comparison does more to terrify than clarify.”
Zumbrun goes on to explain:
“From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade…This time, many economists believe a rebound could begin this year or early next year.”
The following graphs compares the current unemployment rate to that of the Great Depression:
Clearly, the unemployment rates don't compare.
What is different now?
The economy has not collapsed. This is an economical shutdown to help stop the spread of the virus. When COVID-19 is slowed, the economy I expected to bounce back in a V-shape recovery. That did not happen during the 1930s.
The former Federal Reserve Chairman Ben Bernanke explains:
“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession.” He went on to say that today – “the banks are stronger and much better capitalized.”
What about all that are currently suffering?
We obviously can't underestimate all the hardships small businesses and families are currently experiencing. However, the BLS report shows that 90% of the current employment loss is temporary. Many small businesses are receiving small aid from the government in the form of PPP loans or EIDL loans. Families also receive help from the government in the form of stimulus checks and grants. During the Great Depression there was no government aid.
We have currently paused the economy. The US economy will recover once COVID-19 ends. Don't compare the current environment to that of the Great Depression. Bernanke put it best:
“I don’t find comparing the current downturn with the Great Depression to be very helpful. The expected duration is much less, and the causes are very different.”
If you are looking to buy or sell, contact South Florida's Real Estate Experts at Prestige Waterfront Realty. We know the area, we know the market, and we stay up to date with the economy. We can help guide you through the entire process. Call us at 954-830-7000 or email Tegov@AskPWR.com.