Today's episode is brought to you by the letters V, U, W, L, I and K.
In this new video series we'll be providing actual in-depth information on subjects
affecting the Texas economy.
Immediately prior to the recession, the U.S. was experiencing its longest
economic expansion in history dating back to 1854.
This expansion lasted through 16 iPhone releases.
Then in early 2020 oil prices began dropping until they reached historic lows in April.
At the same time the world was beginning to react to the never before seen SARS-CoV-2 better known as COVID-19.
The lockdowns that followed were designed to slow the spread of COVID, but also forced millions
into unemployment.
Not surprisingly, that plunged the economy into a recession unlike any other.
Okay... that was a tad dramatic. There is truth in that statement.
Most recessions occur because of an imbalance in the economy, not a virus.
So, economists haven't known exactly what to make of this one.
While our country -- and the world, really -- experienced a pandemic back in 1918,
a lot about our life and economy have changed since then.
As a result, we don't have historic data to help us understand
what's happening now.
Additionally, it typically takes more than a few months of economic decline
seen across multiple areas for a recession to be called,
a responsibility that falls to the National Bureau of Economic Research.
In June of 2020, they did just that.
Luckily, the Texas economy began to rebound in just a few months, however
depending on where you live or what you do for a living, you
may not realize it. This is where we turn to the alphabet.
Early on economists and analysts begin talking about the shape of recovery,
specifically the letters V, U, W, L and sometimes I.
The letter describes the shape of a line graph, and the line graph is showing GDP and time.
So, V is an ideal scenario
where the recovery is as sharp, drastic and immediate as the recession.
U-shaped recoveries are a little less optimistic
and W experiences a few bumps.
Then there are the worst case scenarios.
L reaches a long plateau while I is like sinking endlessly to the bottom of the abyss...
No one wants I.
As the recession or recovery - depending on your perspective - continued, some began to say
none of these letters quite represented what people were experiencing.
Some begin to talk of the letter K.
In a K-shaped recovery different sectors, industries and employee groups fare differently,
some recover and some remain in recession.
Throughout the pandemic, some industries have suffered more than others.
Employment in the arts, entertainment and recreation
remained down 27 percent nine months after the recession's start.
Even within industries, the pandemic's impact have not always been equal.
In retail, online shopping tax revenue increased 153 percent year-over-year
and employment at grocery stores and building supply stores is up, yet overall
these numbers are down. So, a K-shaped recovery is like someone telling you,
"I have good news and I have bad news."
There are signs of a growing economy. Personal savings are up. Credit card debt is down.
While at the same time many people are hurting.
Maybe that has you wondering why does this matter?
Who cares about a letter when people are lining up for food and kids can't go to school?
And true, focusing on a single letter could easily oversimplify a complex economy.
Any graph showing GDP over time isn't meant to hide the realities of what's happening to people.
Instead, it's one tool used to represent what's currently happening
and predict what will happen with the economy in the future.
That's an important part of the Comptroller's job. Governments need information from this metric
and others when drafting budgets, offering aid and writing other legislation.
Even businesses and nonprofits can benefit from a more thorough understanding
of the current economic situation in order to adapt to their business models and continue operations.
It will likely be some time - an unknown amount of time -
before pre-pandemic life returns, if ever. Uncertainty has been the
one constant over the past year and at this time no one knows the direction of the economy.
Disparities between industries will slow our recovery. But those industries and businesses
are run by creative, resilient individuals and innovation has a way of becoming business as usual.
Today's episode [laughs]...
I panicked I forgot to actually record audio. Signs of a growing acron- economy.
Stop again. I'm going to redo that last part for you and [clicks tongue] hopefully learn it a little bit better.