The US economy just hit its worst quarter since 2008 — but the human story behind that number is even bleaker

The hard and fast empirical evidence of just how economically damning Covid-19 will be is starting to trickle in. The numbers — though wholly expected — make for grim reading.

US gross domestic product, widely referred to as the broadest measure of economic health, slumped at an annual rate of 4.8 per cent in the first three months of 2020, the Commerce Department announced today, marking the first fall since 2014 and the worst contraction for any quarter since 2008.

The figures are going to get much worse. The period measured so far spans to the end of March, by which time the full impact of business closures and layoffs had in many cases not really begun to show.

But even as we start getting readings from the worst weeks of the crisis, and eventually numbers that provide hope that some semblance of recovery is underway, we should appreciate the limits of the yardsticks we’ve relied on and referenced for decades.

Across many countries, official statistics in the years following the 2008 financial crisis implied that economic resilience was rebuilding even if measures like wage growth and productivity had yet to pick up. Unemployment was low — at record lows in some places — while stock markets rallied hard as a result of super-low interest rates sending investors on a ferocious hunt for yield.

But the headlines only painted part of the picture — the convenient part, perhaps — and certainly didn’t reflect real people’s lived experiences. As author and journalist David PIlling put it in an article for Time magazine, “aggregates hide the nuances of inequality”.

Humans care deeply about relative prosperity — more than they do about absolute wealth — and this has a marked impact on overall wellbeing. So while the reported economic recovery might have benefited a part of the population — a small minority, that is — the figures don’t even begin to convey the relative hardship experienced by others: the impact of societal inequality materializing in the wake of the crisis and the long-term reverberations of that.

Pilling references a research paper from 2003 titled “Monkeys reject unequal pay”, which examines what capuchin monkeys do when their mate is given a tastier snack than the cucumber they’re given. When all monkeys get cucumbers, they’re all content. As soon as one is presented with a sweet and juicy grape, the others become distraught.

Of course, having the capacity to give at least one monkey a grape, like having the capacity to offer at least a part of the population a pay rise or superior standard of living, might from a purely statistical perspective be seen as a good thing (or at least as better than not being able to offer any monkey a grape). But the inequality it creates, or exacerbates, and the impact of that inequality isn’t captured in the headline figure; crucially, neither is the lived experience of the majority of the population.

As a measure of economic prosperity, GDP was introduced during the industrial age. At that time, many western economies were still largely built on manufacturing and agriculture. In the UK these days, the services industry accounts for around 80 per cent of revenues generated by the entire economy, and services also provide roughly that proportion of jobs. GDP struggles to consider intangible assets linked to the services economy, like insights, networks, brand value and intellectual property.

On Sunday, an adviser to the White House said that shutting down the US economy due to the coronavirus pandemic will likely push the national unemployment rate to 16 per cent or higher for April. Again, as a way of illustrating the gravity of any economic crisis, the official unemployment rate should be treated with caution.

Data from the Brookings Institution in 2016 found that 7 million American men between the ages of 25 and 54 – mostly too old to be at school but too young to retire – are neither working nor looking for work. They aren’t looking after children or ageing relatives either. Many would like to be employed, but they’ve struggled to find adequately paid work so have given up looking. The result is that they’re not counted towards the official unemployment rate.

So as more data pours in, ostensibly chronicling the lifespan of this crisis, treat it with care. Numbers can provide a useful narrative but rarely do they tell the real human story — and that, unfortunately, could be far more tragic than the data suggests.