I will be the first to tell you that the pandemic affected my finances directly. Within the first three weeks of the pandemic, I lost 90% of my pre-pandemic clients and none of them have returned. I got email after email of clients closing their doors and went through months of wondering if my business would be next. To keep my business afloat, I took on a lot of lower-paying work and promised myself I would exhaust every option possible before looking for a regular job or accepting an unemployment check.
Thankfully, hard work and good business relationships paid off. Now, my clients are begging contractors to pick up more work and contractors seem less willing to do any. Everywhere I look, I see cars with brand-new tags, loaded U-Haul trucks with happy drivers, and RVs cruising down the highway. Americans are spending a lot of money on non-essential items, so is there really a recession?
A Conversation Between Business Owners
Today, I had some on-site work to do and struck up a conversation with the property owner, who also happens to own a restaurant. I asked him how his business was doing and he laughed. “You know,” he said, “I know a lot of people have lost their jobs and I’ve seen a lot of restaurants close down and I have no idea why. My business is BOOMING. We’re making more now than we did, pre-pandemic.”
He added, “It’s not just me, either. A friend of mine owns a motorcycle dealership and there are usually hundreds of bikes on his lot. I dropped by this week and there were about 20. As soon as he gets them in, people ride them right off the lot.”
What the Economists Have To Say
Regardless of what our observations have been, economists reported that the American economy officially entered a recession, in June. In fact, the original announcement came from the National Bureau of Economic Research. The prior month, the unemployment rate was a whopping 13%. Economists have not seen these unemployment levels since the Great Depression and wonder if this will turn into an economic depression.
Layman people often use the term “recession” loosely. However, economists have a specific test an economy must meet to get slapped with the dreaded R-word. CNBC explains that “recession” describes an instance of at least two consecutive quarters where an economy churns out a negative gross domestic product. “Depression” has a looser definition and simply refers to a prolonged period of economic decline. The only American depression to take place during industrial times lasted for a decade.
You can’t argue with numbers — at least, I sure won’t make a habit of doing so. Even so, one has to ask how it’s possible that during a recession, Americans have the resources to spend more money than usual on luxury items. Even I am guilty of this, having traded in my budget car for my dream SUV, in July.
A Comparison Between American and Jamaican Recessions
It’s perfectly possible that maybe I’m just not used to First World recessions. I experienced my first recession while living in Jamaica. Like many millennials, it hit while I was in college. In fact, 2008 was the first year of my bachelor’s degree. I had already been living on my own since 2006 and could see a clear difference between how much food cost and how much I spent on utilities. My monthly budget was around $450. Budgeting was no walk in the park.
America certainly had its own problems during that time. However, there seem to be differences in how its economy responds to a recession versus Jamaica and many other developing nations. To illustrate this, I’ll use inflation. This is another word we often use loosely, but in economic terms, it refers to higher prices for goods and services corresponding with the declining value of money. Some inflation is healthy for an economy, but too much can price even basic goods and services outside the reach of everyday customers.
America’s average annual inflation rate is around 3.84%. It had the following inflation rates from 2007 to 2011.
- 2007: 2.8%
- 2008: 3.8%
- 2009: -0.4%
- 2010: 1.6%
- 2011: 3.2%
Sadly, Jamaica has a long history of an unstable economy. You see this most clearly when you consider that in the past 25 years, we have seen inflation rates as low as 2.35% and as high as 77.3%. Jamaica experienced the following inflation rates from 2007 to 2011:
- 2007: 9.15%
- 2008: 22.03%
- 2009: 9.57%
- 2010: 12.61%
- 2011: 7.53%
Put simply, no matter how hard Americans had it at the time, Jamaicans were in much deeper water. Thankfully, the economy has mostly recovered and economists project an ongoing inflation rate of 5% for the next few years. Time will tell if the pandemic sets us back again.
My Final Verdict
I recently reached out to one of my friends to ask if his business was in recovery now that people are feeling more comfortable flying again. He’s an engineer that runs a business in the aerospace industry and he took a serious financial hit when the pandemic started. He said business has not picked up again and that he plans to retrain for another profession altogether as a Plan B while he waits. He is one of many business owners still struggling to recover from the curve ball the pandemic threw them.
So, is there really a recession in America? There most certainly is. However, the coronavirus has been very selective about who it takes as financial victims. I also think many people have selected themselves. I know of too many businesses desperately trying to get workers to pick up shifts and contract assignments to believe the high unemployment rate doesn’t stem, in part, from some people looking to profit from free unemployment checks. It certainly isn’t the majority, but I’ve seen it taking place with my clients. (Where did all the other contractors go?)
Finally, there is the fact that I spent my first recession in a developing country and will now spend this one in a developed country. Maybe what looks like suffering to First Worlders will always look like thriving to me.
Have you spent both of the most recent recessions on American soil? Does this recession bear a striking resemblance to the former, in your opinion? Or, do you also see differences? Also, how has the recession personally affected you, so far? Share your experiences in the comments below!
PS:- Please excuse my tardiness with posting over the past few weeks. I’m working on a few side projects on my days off and can’t wait to share them with you. Unfortunately, it will be December before I can share full details. I will say, however, that one includes my recently finished vampire novel! After doing my pre-beta read, I’ll be looking for beta readers, so let me know if you’re interested!