In April and May of 2020, it appeared that the COVID-19 pandemic would wreck the economy and that the effects could last for a very long time. That April, unemployment was at its highest since World War II. Gross domestic product in the second quarter of the year fell by 32.9%.
The economy rebounded strongly, particularly last year. That has leveled off, and GDP may drop in a new recession, but it will not be by double digits. The direct effect of COVID-19 on the economy has virtually disappeared.
The reasons for the waning effect could not have been forecast in early 2020. Most of the improvement is due to vaccination rates and the number of people who already have had the disease and developed some immunity. These have made Americans more comfortable with COVID-19’s spread, if any major disease can be characterized that way.
One only has to look to the airline industry for proof Americans have started to ignore COVID-19 in large numbers. Carriers have been crippled by their inability to keep up with flier demand. People rarely wear masks on planes.
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Retail stores have posted foot traffic at pre-pandemic levels. Even though some stores request that people wear masks, that advice is often ignored.
As more Americans become vaccinated and more are infected, it is clear that the number of people who get seriously ill has declined considerably. This lack of severe illness has added to the comfort of large parts of the population.
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What could change to make COVID-19 a major drag on the economy again? Only a variant that spreads quickly and is robust enough to cause serious symptoms again would matter. Viruses mutate unexpectedly, so that possibility should not be ruled out.
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