Discussion Paper

The Coronavirus Shock Looks More like a Natural Disaster than a Cyclical Downturn

Abstract: It’s tempting to compare the economic fallout from the coronavirus pandemic to prior business cycle downturns, particularly the Great Recession. However, such comparisons may not be particularly apt—as evidenced by the unprecedented surge in initial jobless claims over the past three weeks. Recessions typically develop gradually over time, reflecting underlying economic and financial conditions, whereas the current economic situation developed suddenly as a consequence of a fast-moving global pandemic. A more appropriate comparison would be to a regional economy suffering the effects of a severe natural disaster, like Louisiana after Hurricane Katrina or Puerto Rico after Hurricane Maria. To illustrate this point, we track the recent path of unemployment claims in the United States, finding a much closer match with Louisiana after Katrina than the U.S. economy following the Great Recession.

Keywords: disaster; pandemic; Katrina; coronavirus; jobless claims; COVID-19;

JEL Classification: J0; R10;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2020-04-10

Number: 20200410a