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The 2020 Recession and Unusual Recovery

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The 2020 Recession and Unusual Recovery

January 19, 2022

It was a recession unlike any other. In 2020 the government purposely turned off the economy. It also sent people lots of money. So it should not be a surprise that America is experiencing an unusual recovery. The figure below shows household net worth and how it fared during the 2007-2008 recession and the one in 2020. Unlike most recessions, household wealth increased sharply in 2020 and 2021. It was only in the last few months that it started growing at a slightly lower rate, but wealth is still much higher that it was before the pandemic, even accounting for inflation. This is due to many factors, rising asset prices, large government transfers, and nowhere to spend money. The last recession's recovery dragged on slowly in large part because household balance sheets were decimated by the housing crash and financial crisis. Their strong position today suggest strong growth and spending will feature in this recovery, assuming asset prices don't fall through the roof. 

Source: FRED

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.

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