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Issue #35 | June 30, 2020

Coronavirus, the Fed, and You

How has the COVID-19 mortality rate changed in your state?

The Cleveland Fed’s updates show how the number of COVID-19 deaths rises and falls from week to week. See the data visually.

Disproportionate impacts on vulnerable communities

A growing digital divide. Challenges for the homeless and people who don’t use banks. These are two of the impacts COVID-19 is having on people and communities, according to our stakeholders.

Government revenues will drop by billions in fiscal year 2020 alone

Shutdowns because of COVID-19 will cause state and local tax collections to decline sharply over the next two fiscal years, according to a recent data brief. See the estimated declines for your state.

“A long road ahead,” but…

Nearly two-thirds of consumers expect the coronavirus outbreak to last one or two years. However, the percentage of consumers who fear losing a job has been trending down since mid-May, according to the latest update on the Cleveland Fed’s Consumers and COVID-19 economic indicator.

How high and how long will unemployment spike?

Researchers estimated in early May that the US unemployment rate would likely peak below 20 percent in May, then come down rather swiftly over the last two quarters of the year. Their projections are less stark than some of the more alarming ones reported, but there are unknowns.

Tools that work in the fight against COVID-19

Adequate testing and selective containment measures can be effective against the pandemic, researchers recently found; in the absence of adequate testing capabilities, interventions such as social distancing and lockdown measures should be employed.

How do we open the economy while maximizing health?

Leading health and economic experts recently discussed ways to reopen the economy safely as scientists aggressively pursue an effective COVID-19 vaccine or therapy. Watch this video (or read the transcript) of the conversation, which was moderated by Tom Brokaw, senior correspondent with NBC News.

Help for small and medium-sized businesses

The Fed’s Main Street Lending Program provides loans to assist small and medium-sized businesses. Learn about the program, including who’s eligible to borrow.

Race, geography, and income levels affect the distribution of COVID-19

The spread of COVID-19 across the United States has been uneven, varying by geography, race, income, and population density. Researchers from the New York Fed use county-level data to investigate whether majority-minority counties—or those in which at least half the population is Hispanic and/or non-Hispanic black—and low-income communities have been affected differently than other areas. See the findings.

COVID-19 and stimulus payment scams are still out there

Just like the virus, COVID-19-related scams are still spreading. Here’s an overview of what to watch out for, including robocalls, products claiming to cure the disease, and charity scams.

Aggressive fiscal and monetary policies necessary for strong, quick recovery in the US

Only extraordinary measures, such as negative interest rates and government spending on infrastructure, will lead to a robust recovery, assert two St. Louis Fed researchers. See the blog post.

Use it or lose it

A persistently depressed economy could emerge if many households and businesses remain pessimistic about future economic conditions and reduce their spending. Noting that “one person’s spending is another person’s income,” a St. Louis Fed senior vice president and economist explores the idea of a hot money credit program, where money is deposited regularly in people’s accounts with a requirement that the funds be spent by a certain date or be lost.

Data, technology, and COVID-19: Weighing privacy and the “greater public good”

Harnessing the power of data and technology can help people, communities, and governments respond to the coronavirus pandemic. This blog post explores considerations on how we can use information to overcome COVID-19 and prepare for the future, while respecting individuals’ data rights.

The fork in the road

Three economists from the Reserve Bank of Richmond examine the hard numbers at the heart of the opposing theories of continued social distancing or wide-scale reopening. What courses of action do economic analyses indicate should be taken?

Recently, from the Cleveland Fed

  • Testing cryptocurrency, one cup of Joe at a time

    A Fed team is working to research virtual currency technology using a Fed-created application called CoffeeCoin. The app allows team members, including those at the Cleveland Fed’s Treasury Services (eGov) department, to order coffee among each other through an experimental currency similar to cryptocurrency. The research supports the Federal Reserve’s goal of understanding how digital currencies are designed and function to help ensure that the systems through which Americans make payments are safe and efficient. Intrigued? Learn more about eGov and its digital payments expertise and job openings.

  • Saying "yes" to vouchers

    Housing vouchers, which help pay for the cost of privately owned rental properties, can help families move to areas with less poverty and better schools. Evidence suggests that raising voucher payment amounts is not enough to entice landlords to accept these voucher tenants in high-opportunity neighborhoods. Discover changes that could increase the number of landlords who say “yes.”

  • Climbing the ladder: The skills—rather than the degrees—that get people better pay

    Nearly half of those employed in lower-wage jobs have the same or similar skills needed to move into a job paying nearly $15,000 more per year. Researchers explored this finding and others in a study of occupations, especially those that pay above the national median wage and do not typically require a bachelor's degree.

  • What's behind the improvement in immigrants’ skills?

    On average, the skills of foreign-born workers have improved over the past decade, making it easier for these populations to assimilate into the US workforce. Learn what’s driving increased educational attainment and English proficiency in this analysis of Census Bureau data.


What do the recoveries after downturns like those relating to the 1918 flu pandemic and the financial crisis that began in 2007 have in common, and how likely is it that this recovery will be like either of those recoveries?


We have to be somewhat cautious about drawing analogies between the 1918 flu pandemic or the financial crisis and the current crisis.

The 1918 flu really affected working-age people, mainly males between the ages of 15 and 45, and struck as we came out of World War I, which left a big hole in the labor market. Many soldiers died in the war, and we had a large proportion of that demographic die from the 1918 flu in the United States. That is very different from what we have now; the largest proportion of the population dying from COVID-19 in the United States is people like me, people older than 55 moving from work into retirement.

The recession in 1920–1921 that followed the flu crisis is largely perceived as having happened because of extremely tight monetary policy—the Federal Reserve’s actions, over the span of months, made it more expensive to borrow money. Flu-related restraints—for example, people’s keeping their kids home from school—weren’t as extensive and didn’t affect as many industries as COVID-19 affects today; back then, the economy was mainly agricultural and industrial and included fewer high-contact service businesses.

The recovery that followed—the Roaring Twenties—was very robust, thanks largely to the end of “the war to end all wars,” the recovery from it, and the demographics of the time. It was also a time of worldwide expansion and innovation—think of radio broadcasts, the discovery of penicillin as well as insulin (for type 1 diabetes), and the bread slicer (and electric toaster). The population in 1918 was much younger, generally, than the US population today, with a smaller proportion of the working-age population nearing retirement. I don’t think our recovery from the COVID-19 pandemic will be that similar to the one enjoyed during the Roaring Twenties, especially with the uncertainty regarding progress in the battle with the coronavirus worldwide.

In the financial crisis and Great Recession of 2007–2009, we had financial excess and a banking structure and system in weak condition. There were financial imbalances—for example, people who were highly indebted and owed more on their houses than their houses were worth and businesses that couldn’t make a go of it and filed for bankruptcy. The realization that very few real assets backed many loans undermined confidence in the financial system. A lot of people suffered big consequences, and they hesitated to get back into making purchases financed by debt, such as mortgages, and taking on risk more generally. People questioned whether the Western financial market structure was viable without reform, and the equivalent of a financial lockdown ensued: Reforms such as Dodd–Frank made it so people and companies were less able to take out so much debt that it put others at risk. Growth slowed, but indebtedness became a more credible indebtedness, one backed with assets of comparable value to the amount of debt. As a result, our banking system was much stronger going into the current crisis.

Partly because the financial system now is healthier than it was in 2009, there are people who think this recovery will be quicker than the Great Recession’s recovery. I think we’re all recognizing that a pandemic is something few expected, and we’re trying to figure out what paths forward make sense in environments where COVID-19 is spread and still lurks. We are facing the potential for lasting changes in our industrial structure; there are a number of businesses that could permanently lose many of their customers because the services the businesses offer can’t be made safe enough to encourage customers to use them. I feel for people whose livelihoods depend on such businesses. How is the economy going to rebound from the loss of these jobs? It’s just so hard to think about how many people are really suffering right now. The longer that people fear being exposed to the virus during economic activity (restaurants, entertainment, travel, etc.), hindering or preventing a recovery to previous “normal” levels, the more painful it will be.

In my own judgment, the recovery from this sharp decline will not take the form of a V—quickly up after a quick drop—but it may not be as slow and sluggish as the recovery after the 2009 recession; it could be somewhere in the middle. Today’s huge layoffs are, for the most part, temporary. This recovery will hinge on the virus, the shutdowns associated with it, and the rational responses of consumers and businesses to lay low and cut back activity to avoid contact and spreading the virus. Plenty of people seem eager to get back to something resembling normal activities, and it is unclear whether that is possible without creating a second wave of infection that strains healthcare capacity and leads people to step back from normal economic activity again.

See also: The different patients and economies of the 1918 and 2020 pandemics

Ellis Tallman

is research director and executive vice president at the Cleveland Fed. He leads the Bank’s Research Department, whose economists have been working during this pandemic to publish data about where the economy stands and to study policy responses to the pandemic-related shutdown. Tallman’s own research focuses on US historical episodes of financial crises and policy responses, economic forecasting, and macroeconomics.

By the Numbers

On the Calendar

  • July 24

    Investment Connection Orientation and CRA Training (webinar for Toledo, Ohio, organizations)
    (Learn more about Investment Connection.)

  • September 23

    Investment Connection virtual meeting for Toledo, Ohio, funders
    (Organizations will pitch proposals to funders who may consider funding those proposals.)

  • June 23–25, 2021

    Policy Summit 2021: Pathways to Economic Resilience in Our Communities (Cleveland, OH)

From around the Federal Reserve System

Words of support from the Federal Reserve

Federal Reserve Banks across the country are making statements in support of the movement for racial equity. Read Cleveland’s renewed commitment to take action against systemic racism, Atlanta’s moral and economic imperative to end racism, Dallas’s commitment to inclusion, New York’s belief in economic equality, San Francisco’s racial equity primer, and St. Louis’s statement on a more inclusive economy.

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