Today we held a conference call with economist Dr. Matthew Martin who provided a regional and national economic outlook relating to COVID 19. The presentation and call recap are below.

Special thanks to:
Matthew Martin, PhD
Regional Executive, Federal Reserve Bank of Richmond

The views and opinions expressed herein are those of the author. They do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System. The pandemic poses an ever-changing situation, so please contact your banker or other service provider for specific questions.

As the effects of COVID 19 precautions including stay at home orders and social distancing take their toll on businesses and the economy, economists are drawing comparisons to the Great Recession of 2008-2009. Unlike in 2008, our economy was healthy going into the pandemic last month. Another important difference is that the previous recession was economically-driven while this one is the result of a public health crisis. While there are differences between the previous recession and our current economic climate, we can look to those circumstances, as well as other events such as 9/11, to take a look at where things are heading.

Two indicators to monitor closely are consumer spending and employment. By all consensus and data, the COVID 19 pandemic is having sharp and unprecedented effects on both.


Employment was expanding and the unemployment rate was at its lowest level since the late 1960s prior to the pandemic. Since mid-March, over 30 million people in the US have filed for unemployment, over 1 million of those in North Carolina. About 1/5 of workers in the US are in industries that have been directly impacted by the pandemic.

Comparing the employment losses to the Great Recession, about 3 million jobs were lost in the first quarter of 2009 while the US could lose up to 20 million jobs through May of 2020. This could result in an unemployment rate of about 14% nationally.

The Paycheck Protection Program is an important policy in place to mitigate these losses and get workers back on the job. There have been two rounds of federal funding for PPP so far, with another round under discussion in Congress.

Consumer Spending

Consumer expenditures account for about 68% of GDP. Similar to employment, consumer spending was strong before the pandemic. GDP is expected to fall by 26% in the second quarter but remain flat in Q3 and rise to 6% growth in the fourth quarter, according to private sector forecasts.

The CARES Act direct cash payments to citizens are intended to mitigate the drop in spending, but consumer confidence will be an important driver of increased spending as states reopen. Businesses with stringent procedures for cleaning and social distancing will earn consumer confidence sooner.

Policy Response

Because this is a health crisis and not a banking crisis, health policy is leading the way on responding to the pandemic while the fiscal policies are in place to address the economic impact created. The Federal Reserve Bank is involved in a range of programs, three of which are important to local communities. They are a PPP lending facility, they have a program for city and state municipalities, and they are the lender for the Main Street Lending Program. The Main Street Lending program is expected to open soon, and your banker will have details for companies that are interested in learning more.


Because the economy was on such good footing entering the pandemic, the structure is in place to gradually return to normalcy on the economic front. When that will be is largely dependent on health policy and the virus. As states reopen, keeping transmission from occurring will remain a top priority.