The 2020 Recession Explained

The 2020 recession was caused by the shutdowns related to stemming the spread of the coronavirus. It was the shortest and deepest on record.

Written by Jess Ullrich / June 30, 2022

Quick Bites

  • The 2020 recession came about after the world shut down and we stayed home to halt the spread of the coronavirus
  • It was the shortest and deepest recession on record.
  • The government helped us dig out with fiscal support and monetary policy.

Despite our differences, we can all probably agree on one thing: 2020 was a memorable year—in the worst possible way. The COVID-19 pandemic altered the course of our lives, stretched global healthcare systems to their limits and tanked economies. We faced the shortest but deepest recession on record.

Read on to learn precisely what caused the 2020 recession in the U.S. and what steps the country took toward recovery.

Inside this article

  1. What's a recession?
  2. What caused the 2020 recession?
  3. How did the government help out?
  4. When did it end?

What's a recession?

A recession happens when the economy slows down for an extended period of time, but usually not more than a year. The country’s gross domestic product (GDP, a measure of the goods and services produced in a country) declines and jobs are lost as we cut back on spending and businesses slow production. Recessions, while unpleasant, are a normal part of life. So get used to them, and prepare.[1]

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What caused the 2020 recession?

In March 2020, much of the country went into lockdown to halt the spread of the COVID-19 virus.

The effects were immediate. With so many businesses closed, travel all but impossible and hospital beds filling up, spending tumbled. The GDP dropped by 5% for the first three months of 2020, and tumbled 31% for the subsequent three months. and by April 2020, unemployment spiked to 14.3%—the highest rate recorded in the U.S. since 1948. At the time, over 23 million workers were jobless.[2,8]

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The leisure and hospitality industry suffered the greatest job losses–no surprise since we went nowhere for a while–but every major industry lost jobs.[9]

How did the government bail us out?

The government quickly intervened to support what they saw was a complete economic disaster. On March 6, 2020, federal agencies received $8.3 billion in emergency aid with the passage of the Coronavirus Preparedness and Response Supplemental Appropriations Act, which included money for small businesses among others.[3] Shortly after, the $3.5 billion Families First Coronavirus Response Act was approved, paving the way for tax credits, paid medical leave and employment protections.[4]

The economy was in such bad shape, however, that the initial measures simply weren’t enough to help. On March 27, 2020, the U.S. government approved the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a more than $2 trillion stimulus package offering emergency relief to businesses and American families.[5] In April, the Federal Reserve also approved a $2.3 trillion lending program designed to help struggling businesses.[6]

In other words, the U.S. government threw a lot of money at the problem.

When did the 2020 recession end?

According to the National Bureau of Economic Research, the U.S. recession officially ended in April 2020, making it the shortest recession in history. The third quarter of 2020–July, August and September–saw GDP soar to nearly 34%, in part thanks to the CARES Act stimulus package—the unemployment rate remained high.[7]

By August 2020, the unemployment rate dropped from the recession’s peak of 14.7% to 8.4%, with 1.4 million jobs added. In 2022, unemployment is at a very low 3.6%, and close to the figure for Feb. 2020.[10] And the number of job openings is around 11.4 million as of April 2022, close to an all-time high, meaning the employment scenario–for now–in the U.S. is robust.[11]

The long-term effects of the recession, however, remain to be seen.

Article Sources
  1. “Preparing for the next recession: 9 things you need to know.” Capital Group. April 2, 2020. https://www.capitalgroup.com/advisor/insights/articles/guide-to-recessions.html
  2. “Unemployment Rates Rise to Record High of 14.7 Percent in April 2020.” U.S. Bureau of Labor Statistics. May 13, 2020. https://www.bls.gov/opub/ted/2020/unemployment-rate-rises-to-record-high-14-point-7-percent-in-april-2020.htm
  3. “Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020.” U.S. Congress. https://www.congress.gov/bill/116th-congress/house-bill/6074
  4. “Families First Coronavirus Response Act: Employee Paid Leave Rights.” U.S. Department of Labor. https://www.dol.gov/agencies/whd/pandemic/ffcra-employee-paid-leave
  5. “CARES Act.” U.S. Congress. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
  6. “Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy.” The U.S. Federal Reserve, https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm
  7. “United States GDP Growth Rate.” Trading Economics. https://tradingeconomics.com/united-states/gdp-growth#:~:text=GDP%20Growth%20Rate%20in%20the,the%20second%20quarter%20of%202020.
  8. “Annualized growth of real GDP in the United States from 2012 to 2022, by quarter.” Statista. https://www.statista.com/statistics/188185/percent-change-from-preceding-period-in-real-gdp-in-the-us/
  9. “COVID-19 ends longest employment recovery and expansion in CES history, causing unprecedented job losses in 2020.” BLS. June 2021. https://www.bls.gov/opub/mlr/2021/article/covid-19-ends-longest-employment-expansion-in-ces-history.htm
  10. “THE EMPLOYMENT SITUATION — MAY 2022.” June 3, 2022. BLS. https://www.bls.gov/news.release/pdf/empsit.pdf
  11. "JOB OPENINGS AND LABOR TURNOVER – MARCH 2022." Bureau of Labor Statistics. June 1, 2022. https://www.bls.gov/news.release/pdf/jolts.pdf

About the Author

Jess Ullrich

Jess Ullrich

Jess Ullrich is a personal finance writer who's been creating online content since 2009.

Full bio

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