When we look back at 2020, the year will be remembered for the coronavirus pandemic and the presidential election. But the economy and personal finance also dominated headlines as the pandemic caused millions of people to lose their jobs, quickly plunging the economy into a recession while the stock market went on a wild ride.
In response to those economic shockwaves in March, the federal government acted quickly to pass the $2 trillion CARES Act, which provided assistance to the unemployed and small businesses, and gave most Americans $1,200 stimulus checks.
From record unemployment to a housing boom, the coronavirus pandemic set the stage for the financial trends we saw in 2020. Here's a roundup of some of the most important and memorable.
To many, February feels like a lifetime ago. But it was just earlier this year that the U.S. was experiencing record-low unemployment, with only 3.5% of the workforce out of a job.
Of course, once the pandemic hit the U.S. and states started imposing shutdowns, things changed fast. In March, the country saw a new unemployment record — the most claims ever filed in a single week. Nearly 3.3 million workers filed for unemployment during the third week of March, shattering the previous record of 695,000 set in 1982.
The numbers slowly fell throughout the rest of the year as states began reopening and many people returned to work. November's 6.7% unemployment rate is still significantly higher than February's, but more in line with what we typically see during a recession.
Not everyone was affected by these job losses equally. Low-income earners saw significantly greater declines in employment than high earners at the onset of the recession, and still account for the majority of those looking for work. Meanwhile, high-income earners saw their employment return to pre-pandemic levels by summer, leading one expert to say in August that "the recession has essentially ended for high-income individuals."
The labor force participation rate — the share who are either employed or looking for work — also took a hit this year as millions of people left or lost jobs and didn't search for new ones. When schools shut down, many parents, mothers especially, stayed home to take care of their children and help with virtual learning. Between February and November, more than 4.8 million Americans left the labor force.
For those who kept working, many shifted to doing their jobs entirely from home. In February, only 8% of the employed workforce was working from home every day. By May, that number rose to 35% and throughout the summer, about one-quarter of workers were working entirely from home.
Remote work appears to be here to stay. Almost half (47%) of corporate leaders said that they will allow employees to work from home full time after the pandemic, according to a recent Gartner survey, while 35% of employees told Gallup they would prefer to continue to work remotely once Covid is no longer a concern.
The shocking rate at which the pandemic hit the economy opened many people's eyes to the importance of having an emergency savings account. The personal savings rate — the percentage of income that Americans put into savings — hit a historic high of 33% in April, suggesting that many people chose to put at least some of their first stimulus check toward their savings.
Millennials and Gen Zers in particular have spent this year bulking up their savings. In a recent survey from lender Laurel Road, 3 in 5 young adults said they have used the current period of forbearance of federally backed student loans to start saving more.
Of course, a lot of the spending we did this year was online as Covid restrictions kept many people out of physical stores. The rate of online shopping has been on the rise for the past two decades and reached an all-time high in the fourth quarter of 2019, when 12.7% of all retail sales were online.
But the pandemic accelerated that trend and in the third quarter of this year, that number reached 15.1%, a 5 percentage point increase from a year earlier.
Covid restrictions also forced us to cancel vacations and stay home. Roughly 1 in 3 people canceled a vacation they were supposed to take this summer, and by August, 2% of people had already canceled a planned trip for 2021. From March through December, travel spending was down more than 50% from the same period last year.
When the pandemic first hit and millions lost their jobs, many experts expected a housing market slump. Aside from the economic collapse, people were wary of visiting other homes and open houses were banned in many states.
But that slump didn't materialize. Mortgage loan rates started falling after the Federal Reserve cut interest rates to zero in March in response to the onset of the coronavirus pandemic, making it really cheap to borrow money. In July, the average rate for a 30-year-fixed mortgage fell below 3% for the first time, and it has continued to fall since, reaching just 2.66% in November.
With rates falling and initial pandemic fears easing, people started house hunting again in May. Over the summer, mortgage demand was up more than 30% from 2019, and sales in August were 24.2% higher than the previous year.
With demand up, prices rose. The S&P CoreLogic Case-Shiller National Home Price Index was up 5.7% annually in August, the largest gain in more than two years. Home prices continued to rise in the fall and hit an all-time high of more than $290,000 in October, according to real-estate site Zillow.
This demand drove competition. In August and September, more than 20% of homes sold for above their initial list price, according to Zillow.
While it was tough to buy a home this year, there has been good news for renters. Nationwide, rent is down 3% from its peak in August 2019, according to Apartment List, and has fallen as much as 25% in some cities. Even notoriously expensive cities like San Francisco and New York have seen rents fall more than 15%.
2020 was a year like no other for the country and its economy. While it's possible we won't see extreme trends like these in 2021, most people wouldn't have predicted a year like this last December, either.
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