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The unique nature of this recession caused the U.S. economy to hit a nadir much quicker than during previous cycles. Activity bottomed in April and has since shown signs of recovery. This revival was triggered by many Sunbelt states slowly reopening in May, refreshing the demand for labor. On the downside, the reopening was accompanied by an uptick in cases within populous Sunbelt states, such as Texas and Florida.

This escalation in the virus took the edge off the Sunbelt’s recovery in July just as some Northeastern states continued to see momentum. The upshot is that the U.S. economy managed to avoid a complete stall, and national job growth persisted through July with an estimated 1.2 million jobs created. The unemployment rate fell nearly five points since April, though it remained excruciatingly high at 10.2%. 

Looking ahead, a return to the devastating economic conditions we saw in April is unlikely. Foremost, the concentration of new cases across many key Sunbelt states is trending downward and there is little appetite for a return to the strict shelter-in-place orders given in the spring. Arguably, the greatest risk facing the U.S. economy is policy uncertainty. Whilst the Federal Reserve is engaged in an aggressive round of quantitative easing to protect the financial system, Congressional action that would continue support for small businesses and households remains in partisan gridlock at the time of writing. Assuming the U.S. can both control the rate of COVID-19 transmission and deliver the right cocktail of policy responses, we think it is likely that the economic contraction in 2020 can be limited to 5%, followed by 5% growth in 2021.