The Shifting Roles of Monetary and Fiscal Policy in Light of Covid-19

The Shifting Roles of Monetary and Fiscal Policy in Light of Covid-19. Center for Strategic & International Studies. Jack Caporal, Victoria Meyer. February 23, 2021

The Covid-19 pandemic has drastically affected both the U.S. and the global economy. In February 2020, the U.S. unemployment rate was at near lows of 3.8 percent. By April, it reached 14.7 percent—nearly five percentage points higher than the peak of the Great Recession. While many of these unemployment claims were temporary, the economy is still in distress. In October 2020, 40 U.S. states either added fewer jobs than in August or lost jobs. The U.S. national rate of job growth in September and October was less than half its August rate. By January 2021, the economy had over 9 million fewer jobs than prior to the pandemic. Permanent job losses remained elevated in January at 3.5 million, 2.2 million more than the previous February. The labor force participation level was 1.9 percent lower than February 2020, indicating that individuals who left the workforce have not rejoined it. In terms of the global economy, the International Monetary Fund’s (IMF) October 2020 World Economic Outlook predicted that the world real GDP would fall by 4.4 percent from 2019. [Note: contains copyrighted material].

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