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Social Education 85(2) , pp.64–71 ©2021 National Council for the Social Studies Teaching the Economic Effects of the Pandemic Pandemic 101: A Roadmap to Help Students Grasp an Economic Shock

Kim Holder and Scott Niederjohn

This article focuses on the major national economic indicators and how they changed within the United States real GDP; the over the course of the COVID-19 pandemic. The indicators that we discuss include from a Ford plant in Canada is not. (GDP), the rate, rates, , and typically measure real GDP other variations of these measures. We will also present that sheds light on the as a growth rate per quarter: Is GDP get- monetary and responses to the pandemic. Graphs of these are ting bigger or smaller compared to a prior sure to grab teachers’ and students’ attention due to the dramatic shock fueled by the quarter? In fact, a common definition of pandemic. We will explain these economic indicators with additional attention to what a is two quarters in a row of they measure and the limitations they may present. Teachers will be introduced to the declining real GDP. Incidentally, it also Federal Reserve Economic Database (FRED), which is a rich source of graphs and measures total U.S. income (and spend- information for teacher instruction and student research. Further classroom-based ing) and that explains why real GDP per resources related to understanding the economic effects of the COVID-19 pandemic capita is a well-established measure used are also presented. to compare how affluent one nation is compared to another. (U.S. real GDP per The Pandemic and the org/). Students may be familiar with eco- capita is about $56,000; it is closer to The COVID-19-induced pandemic nomic shocks of the past like the Great $3,000 in Nigeria.) has had an impact on nearly every area Depression and World War II; however, An examination of Figure 1 reveals of life. Beginning with lockdowns man- this article addresses a present-minded the percentage change in growth in real dated in most states in March 2020, the study of the shock they are currently liv- GDP since 2007 by quarter. Over most way Americans work, socialize, travel, ing through. of that period the U.S. economy was in spend , attend school, and nearly an expansion. The shaded area on the everything else has been affected. Of The left side of the chart shows the recession course, this has been widely reported in GDP, Production, and Spending induced by the in 2008 the media and has dominated the public The most widely used measure of the and 2009. And the dramatic data on the conversation for months. However, it is total economy is real GDP. Real GDP right side of the graph shows the present also interesting to look at this pandemic measures the total of all final and situation. There was a huge decline in from an economic perspective. Economic services produced within the United real GDP in the second quarter of 2020 data reveals the impact of many of these States over a time period and is adjusted as states imposed lockdowns on their changes. For teachers and students, a for inflation. To avoid double counting residents and . However, real review of this data can be an intriguing only final are counted. GDP snapped back at the fastest rate in way to engage with the sometimes-drab (You would not want to count the car’s U.S. history in the third quarter, growing subject of macroeconomic . radio and the car since the car’s overall at an annual rate of more than 33 per- The Federal Reserve already reflects the of all of its cent, as efforts to reopen and (FRED) website provides a convenient components.) Ownership does not matter resume postponed activities previously tool for gathering, graphing, and discuss- in GDP, only location. The output from restricted due to COVID-19 grew over ing economic data (https://fred.stlouisfed. a Toyota plant in Kentucky is included the summer.

Social Education 64 Figure 1. Quarterly Percentage Change in Real GDP for United States, 2007 to Present

Real Gross Domestic Product

40

30 d r i o P e

g

i n 20 d e c e P r

m 10 r o f

e g a n h C

t 0 n e r c P e , o -10 A g

a r Y e m

r o -20 f

e g a n h C -30

-40 2008 2010 2012 2014 2016 2018 2020

Source: U.S. Bureau of Economic Analysis fred.stlouisfed.org While real GDP provides a macro-level look at the state of the economy, it is possible to drill down deeper to investigate sectors of the economy strongly affected by the pandemic. Figure 2 shows sales of food and beverages in the U.S. between 2018 and today after adjusting for inflation. The red line represents sales in stores (grocery and liquor stores) while the blue line represents sales in restaurants and bars. The first interesting thing to note is that there are some stretches of time (September and October 2019, January 2020) where Americans purchased more food and beverages in restaurants than at grocery stores. More interesting for our purposes, however, is the major inflection point beginning in February of 2020. As the pandemic struck and lockdowns were instituted, a dramatic increase in food and beverage purchases in stores occurred while an even larger drop in restaurant and bar sales transpired. The difference between these two series of data narrowed beginning in the spring and into the summer; however, neither has yet returned to their more normal trend.

Figure 2. Food and Beverage Sales in Restaurants and Stores, 2018 to Present

Advance Retail Sales: Food Services and Drinking Places/Consumer Price for All Urban Consumers: All Items in U.S. City Average A final meaningful chart related to Advance Retail Sales: Food and Beverage Stores/Consumer Price Index for All Urban Consumers: All Items in U.S. City Average U.S. production and spending habits 320 as influenced by COVID-19 is shown 300 in Figure 3 (on p. 67). The chart shows 280 rail, air, and vehicle miles traveled by 260 Americans. All dropped off suddenly 240 as the pandemic struck—with obvious 220 implications for airlines, Amtrak, and 1 9 8 2 - 4 = 0

x e d 200 oil and gas producers. The only sector $ / I n

f o 180 to partly recover was vehicle miles as i l . M 160 Americans began to drive more as lock-

140 downs were lifted. While many chose

120 summer driving trips over flying, the

100 number of miles driven continues to Jul 2018 Jan 2019 Jul 2019 Jan 2020 Jul 2020 Jan 2021 be well below trend as so many people Sources: U.S. Bureau of Labor Statistics; U.S. Census Bureau fred.stlouisfed.org continue to work from home.

March/April 2021 65 Ten Useful Teaching Resources on the Economics of COVID

1. The COVID-19 Article Archive (https://fee.org/archive/topics/ unexpected growth that countries may experience due to COVID-19) from the Foundation for Economic Education the pandemic shakeup, and even dive into how behavioral is a rich set of collected articles that take a closer look at science can help us understand actions by individuals and the pandemic from an economic perspective beginning governments. (www.youtube.com/CoronaNomics) in February 2020 up to present day. Of particular interest is an article that explores the economics behind why toilet 7. COVID-19 and the National Debt is a lesson for 9th-12th grade paper occurred around the world (https://fee.org/ students made available by the Council for Economic articles/why-are-there-toilet-paper-shortages-around-the- Education where students will learn about the potential costs world/). and benefits associated with increasing the nation’s debt. This lesson includes an on-demand webinar, presentation slides, 2. Northeastern University’s Pandemic Initiative is a two-part and assessment questions for registered users of the free module on economic efficiency and failure, applying EconEdLink portal (www.econedlink.org/resources/covid- both concepts to the policy responses experienced during the 19-and-the-national-debt/). COVID-19 pandemic. This website includes lectures, slides, and activities along with links to recommended readings (https:// 8. The Federal Reserve Bank of St. Louis’ lesson, Retail Sales, cssh.northeastern.edu/pandemic-teaching-initiative/why- , and the COVID-19 Pandemic (www.stlouisfed. markets-fail-the-economics-of-covid-19/). org/education/retail-sales-employment-pandemic), includes a short video with key data visualized using Federal 3. Marginal Revolution University’s and Incentives: Reserve Economic Data (FRED) charts. More importantly, it The Economics of COVID is a short video that focuses on the acts as an introduction to charts on spending, job losses, the positive of the COVID-19 vaccine and includes a set unemployment rate, the federal funds rate, and more along of practice questions (https://mru.org/courses/principles- with detailed notes on each topic, which allow students to dig economics-/externalities-and-incentives- deeper into each chart series. Charts specific to keeping an economics-covid). As an extra bonus, it is embedded within eye on topics related to the pandemic can be found on the their overall lesson on positive and negative externalities, and COVID-19 Economic Data Tracking dashboard produced by the serves as a relatable, real-world example for your students. economic research team at the St. Louis Fed (https://research. stlouisfed.org/dashboard/49765). 4. For an interactive overview of How COVID has Affected the US Economy, turn to this Kahoot activity by PBS NewsHour 9. Wohl Publishing published a timely “Then and Now” article EXTRA. Have students read an article about workers seeking comparing the economic impact of the COVID-19 pandemic along with a short summary on with the Spanish flu pandemic of 1918. This new resource is the relevant jobs report, unemployment rate, and worker part of their popular Economic Episodes in American History shortages, then engage in a learning checkpoint with textbook designed for high school U.S. History teachers the included interactive quiz. (www.pbs.org/newshour/ (http://wohlpublishing.com/economicepisodes/contact. extra/2020/06/kahoot-activity-how-covid-has-affected-u- html). s-economy/) 10. The Federal Reserve Bank of New York has developed two 5. The has built a YouTube playlist Coronavirus: pandemic lessons (www.newyorkfed.org/outreach-and- COVID-19 and its Consequences which houses both short and education/ny-fed-content-for-educators), one on GDP long video clips appropriate for assigning to your students and the Circular Flow Model During COVID-19 for middle (https://youtube.com/playlist?list=PL0KWoY2XZKw6TDr7 school students (www.newyorkfed.org/medialibrary/ 6U8mPNr9ioxfqOm51). For students, the media/outreach-and-education/ny-fed-content-for- video “Inflation: Could COVID-19 Cause to Rise” explains educators/COVID19-and-the-Economy-Middle-School- how unexpected or volatile inflation can be particularly Lesson-Plan.pdf), and one on The Flow of Money: Monetary disruptive and includes a historical perspective on the Policy During COVID-19 geared for high schoolers (www. relationship with inflation experienced by the United States newyorkfed.org/medialibrary/media/outreach-and- (https://youtu.be/8Enam9uNqb4). education/ny-fed-content-for-educators/COVID- Monetary-Policy_High-School-Lesson-Plan.pdf). Each 6. Econ Films has a new, dedicated YouTube channel, lesson plan includes all handouts, readings, and remote CoronaNomics with a series of videos that begin in April 2020. learning options for teachers. They address the closing of the U.S. economy, highlight the

Social Education 66 Unemployment 5 percent to just over 10 percent during Other closely watched statistics by economists are related to unemployment. Of the prior recession. course, unemployment is closely related to GDP. If less goods and services are being Of course the increase in unemploy- produced in a given time period, fewer employees are needed to produce it. That ment did not affect everyone equally. relationship is quite clear in Figure 4 (on p. 68), which shows the U.S. unemployment Those who could continue to work via rate from 2007 to today. virtual platforms like Zoom were less Not surprisingly, as the pandemic began, lockdowns were implemented and real impacted. Those, however, who work GDP declined, while the unemployment rate soared. The rate rose abruptly from 3.5 in customer facing occupations percent in February of 2020 to 14.7 percent by April of that year— an unprecedented were dramatically impacted as restau- increase. As Figure 4 shows, the unemployment rate took almost two years to rise from rants, bars, and hotels closed in an effort to control the spread of the coronavirus. Figure 3. Passenger Miles by Rail, Air and Vehicle in U.S., 2010 to Present Figure 5 (on p. 69) makes this point as

Rail Passenger Miles/10 (left) the job losses are significantly more Air Revenue Passenger Miles (left) Vehicle Miles Traveled (right) acute among those without a high school 100,000,000 300,000 diploma when compared to those with

90,000,000 285,000 more education, in particular a bach- elor’s degree. 80,000,000 270,000

s 70,000,000 255,000 d s a n u

o 60,000,000 240,000

h “Those, however, who T , M i l o

s / 1 0 50,000,000 225,000

n work in customer facing i l e s M

f o

r 40,000,000 210,000 e service occupations were m b N u 30,000,000 195,000 dramatically impacted 20,000,000 180,000 as restaurants, bars, and 10,000,000 165,000 hotels closed in an effort 0 150,000 2012 2014 2016 2018 2020 to control the spread of Source: U.S. Bureau of Transportation Statistics fred.stlouisfed.org the coronavirus. ” Decline in Passenger Miles by Air, Rail, and Prices and Inflation Vehicle During the Pandemic The consumer price index measures February through May, 2020 December, 2020* the level of price inflation based upon a basket of goods and services the 36.6% typical American family consumes each % month. This statistic reveals that the United States experienced some defla- -96.5 -63.4% tion (overall falling) in March and April of 2020. This is not surprising as the economy contracted significantly, 21.6% % and businesses chose to lower prices in an effort to increase sales. As an example, -91.1 the price of gasoline declined substan- -78.4% tially as demand waned while Americans cut back on their normal travel, including commuting to work. As the lockdowns % 11.2% were relaxed, very low levels of price inflation, as illustrated in Figure 6 (on p. -27.1 70) occurred in the fall. This headline 88.8% measure of inflation masks some of the Least Affected price impacts of the pandemic in particu- * The area in white in the pie-charts is the percentage decline since February 2020. lar industries or sectors.

March/April 2021 67 Figure 4. Unemployment Rate in United States, 2007 to Present

Unemployment Rate

15.0

12.5

10.0 t n e r c P e

7.5

5.0

2.5 2008 2010 2012 2014 2016 2018 2020

Source: U.S. Bureau of Labor Statistics fred.stlouisfed.org

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Econ One Virus_Social Edu Pub_4C.indd 1 Social Education 3/17/21 4:44 PM 68 As an example, prices increased casino prices appeared to be much less rate—the Federal Funds Rate—quickly substantially for meat like steak, pork, affected. to a level near zero percent. This was and chicken in May and June as people done in an attempt to spur economic cooked more and ate at home and, in Fiscal and Monetary Response activity including expansion some cases, stockpiled food and other As the pandemic struck, and the impact and home building, among other sectors. necessities out of concern about poten- on the economy became apparent, both This low level of interest rates was last tial shortages. This pattern is shown in the Federal Reserve () experienced as the Fed cut rates during Figure 7 (on p. 70). In contrast, Figure and Congress (fiscal policy) took dra- the 2008–2009 financial crisis. 8 shows large price declines for hotels matic actions. As can be seen in Figure In addition to the monetary response as demand plummeted. Interestingly, 9 (on p. 71), the Fed cut its key interest by the Fed, fiscal policy was enacted in a large way. The Coronavirus Aid, Relief, and Economic Security Figure 5. Job Losses by Level of Education in United States (CARES) Act was passed by Congress

Employment Level - Bachelor's Degree and Higher, 25 Yrs. & Over with bipartisan support and signed Employment Level - High School Graduates, No College, 25 Yrs. & Over Employment Level - Some College or Associate Degree, 25 Yrs. & Over into law by President Trump on March Employment Level - Less Than a High School Diploma, 25 Yrs. & Over 5 27, 2020. This more than $2 trillion economic relief package included 0 assistance to workers and families, small businesses, and state and local -5 o

A g governments. Figure 10 (on p. 71) doc- a r Y e -10 uments this huge increase in federal m r o f

e

g government spending. a n

h -15 C

t Of course, when the government ini- n e r c tiates such an enormous new spending P e -20 plan without equivalent new revenues

-25 to pay for it, the result is an increase in the national debt. Figure 11 (on p. -30 71) shows that impact as a share of Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 GDP. The federal debt now stands at Source: U.S. Bureau of Labor Statistics fred.stlouisfed.org a level equal to more than 135 percent of Gross Domestic Product. One way Decline in Employment During the to think about this huge debt level is Pandemic by Educational Level that even if all the income earned by Americans through producing a year’s May, 2020 August, 2020 February, 2021 worth of goods and services were spent % % % on debt reduction, we would still not 1.85 1.81 0.67 cover the bill. The actual size of this Lower than Higher than Lower than debt is approximately $27 trillion or Bachelor’s degrees May, 2019 Aug, 2019 Feb, 2020 more than $82,000 per citizen. % % % 13.7 8.2 7.6 Conclusion Some College / Lower than Lower than Lower than The economic impact of the COVID- Associate degrees May, 2019 Aug, 2019 Feb., 2020 19 pandemic will be felt long after it is over. It has changed our lives at % % % an unprecedented rate. It has even 17.2 12.0 8.7 changed our classrooms, how we Lower than Lower than Lower than teach, and how we interact. When we, May, 2019 Aug, 2019 Feb., 2020 High School Grads and our students, emerge into the new world around us we will likely recall % % % 29.5 21.6 12.0 this time as a pivotal historical moment Lower than Lower than Lower than in our own lives and will be looking May, 2019 Aug, 2019 Feb., 2020 for ways to understand what we have No High School Diploma lived through.

March/April 2021 69 to important questions of the day, not Notes Figure 6. Monthly Percentage Change in Consumer Price Index for United States, 2020 just to academic exercises about selected 1. Building a History Curriculum: Guidelines for Teaching History in Schools, Bradley Commission bygone events. They can think critically on History in Schools, www.nche./content. Consumer Price Index for All Urban Consumers: All Items in U.S. City Average about questions that may literally involve asp?contentid=160. 0.6 looming matters of life and death: “Are 2. National Standards for History: Basic Edition (Los Angeles: National Center for History in the Schools, 0.4 we inclined to invade County X because 1996), 15, 16. it’s weaker than we are? Are the people of 3. Bruce VanSledright, Kimberly Reddy, and Brie Walsh, “The End of History in Elementary Schools?” 0.2 Country X likely to resist our invasion? Perspectives on History, American Historical e Based on historical experience, what are Association (May 2012), www.historians.org/ g 0.0 a n publications-and-directories/perspectives-on-history/ h C t likely costs of this invasion for the people n may-2012/the-end-of-history-education-in-elementary- e c r -0.2 of our country and the target country? schools. P e Why would this invasion be likely to suc- 4. Benjamin M. Schmidt, “The History. is BA since the . is Great Recession,” PerspectivesJR on History, American JR -0.4 ceed when so many foreign invasions fail?” Historical Association, Dec. 2018, www.historians. It’s not possible to exercise informed org/publications-and-directories/perspectives-on- ! ! -0.6 history/december-2018/the-history-ba-since-the-great-here here judgment about serious matters like recession-the-2018-aha-majors-report. going to war without asking questions 5. Daniel Willingham, Why Don’t Students Like -0.8 such as these, yet these questions were School? A Cognitive Scientist Answers Questions Jan 2020 Mar 2020 May 2020 Jul 2020 Sep 2020 Nov 2020 Jan 2021 about How the Mind Works and What It Means for Junior Rho Kappa Source: U.S. Bureau of Labor Statistics fred.stlouisfed.org not raised in any prominent or sustained the Classroom (San Francisco: Jossey-Bass, 2009) is the only national way by politicians, the media, or the pub- 28, 25. lic prior to the U.S. invasions of Vietnam 6. Sam Wineburg, Why Learn History (When It’s for Figure 7. Change in Prices for Steak, Pork and Chicken Already on Your Phone) (Chicago: University of 11 Steak, Sirloin, USDA Choice, Boneless, Per Lb. (453.6 Gm) in U.S. City Average and Iraq. The questions weren’t raised, Chicago Press, 2018), p. 92. middle or junior high All Pork Chops, Per Lb. (453.6 Gm) in U.S. City Average 7. Common Core State Standards for Mathematics, Chicken, Fresh, Whole, Per Lb. (453.6 Gm) in U.S. City Average no doubt, because people were largely school students that 30 National Governors Association Center for Best unaware of the exceedingly basic and Practices, Council of Chief State School Officers, recognizes excellence 25 exceedingly important principles of his- 2010, p. 7, www.mathedleadership.org/docs/ccss/ CCSSI_Math%20Standards%20Expanded.pdf. in the field of Social tory that would prompt such informed 20 8. Common Core State Standards for English Language and thoughtful inquiries. There exists Studies. o Arts & Literacy in History/Social Studies, Science, A g 15 a r only one place in society where citizens and Technical Subjects, National Governors Y e m r o

Association Center for Best Practices, Council of f

e 10 may systematically acquire such crucial Chief State School Officers, 2010, p. 7, www. g a n h C knowledge of the world, and that place corestandards.org/assets/CCSSI_ELA%20Standards.pdf. t n

e 5

9. Mike Maxwell, Future-Focused History Teaching: r c is history class. P e Restoring the Power of Historical Learning (Mancos, If history education were to identify Colo.: Maxwell Learning, 2018), 20, 185. 0 10. Graham Allison, “The Thucydides Trap: Are the general principles of historical knowl- -5 edge, the knowledge-thinking feedback U.S. and China Headed for War?” The Atlantic, Sept. 24, 2015, www.theatlantic.com/international/ -10 loop would become complete: useful archive/2015/09/united-states-china-war-thucydides- Jan 2019 Apr 2019 Jul 2019 Oct 2019 Jan 2020 Apr 2020 Jul 2020 Oct 2020 Jan 2021 historical knowledge would support trap/406756/. 11. See for example: Steve Rendall, “In Prelude to War, Source: U.S. Bureau of Labor Statistics fred.stlouisfed.org useful thinking that informs judgment in TV Served as Official Megaphone,” FAIR, Fairness the realm of human affairs. In so doing, and Accuracy in Reporting (April 1, 2003), https:// Figure 8. Change in Prices for Hotels and Casinos fair.org/extra/in-prelude-to-war-tv-served-as-official- history would fulfill the mission of educa- Producer Price Index by Industry: Casino Hotels megaphone/, accessed June 10, 2019. Fairness and Producer Price Index by Industry: Hotels and Motels, Except Casino Hotels tion by supplying knowledge applicable Accuracy in Reporting (FAIR) looked at nightly 10 to the future. coverage from ABC, CBS, NBC, and PBS during a two-week period leading up to the U.S. invasion of If historians wish to confine their Iraq. Of 393 televised interviews about Iraq, most 5 efforts to describing events of the past, featured current or former government officials sounding the drumbeat for war; only “17 percent of that’s their business. Then the task of o 0 total on-camera sources represented skeptical or A g a r identifying enduring principles of histori- critical positions on the U.S.’s war policy.” Y e m r o f

e -5

cal knowledge falls to history educators, g a n h C

who bear the professional responsibility t n

A former journalist and history teacher, Mike e r c -10 to impart important knowledge of the Maxwell is the author of Future-Focused P e world that can help students and soci- History Teaching: Restoring the Power of Historical Learning and The Student’s Friend ety to function effectively in the future. -15 Concise World History. Maxwell has operated LEARN MORE Because that’s our business. the StudentsFriend.com website for world history teachers since 2001, and he recently launched www.socialstudies.org/junior-rho-kappa -20 the futurefocusedhistory.blog. Jan 2019 Apr 2019 Jul 2019 Oct 2019 Jan 2020 Apr 2020 Jul 2020 Oct 2020 Jan 2021

Source: U.S. Bureau of Labor Statistics fred.stlouisfed.org

October 2019 Social Education 295 70 Exploring the wide breadth of Figure 9. Federal Funds Rate macroeconomic data that is at our Effective Federal Funds Rate fingertips can help our students better 2.5 grasp how the economy works and give context to life in a pandemic. Concepts 2.0 that are predominantly framed in his- torical events, such as World War II, that our students no longer remember 1.5 t n e

often fade quickly into the background. r c By making economics relevant to the P e 1.0 tumultuous period they are living in, we give macroeconomic statistics like GDP, unemployment, and the Consumer 0.5 Price Index new life. These economic statistics are still the same as they have 0.0 always been; they simply have a new Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2020 Jul 2020 Jan 2… story to tell. Source: Board of Governors of the Federal Reserve System (US) fred.stlouisfed.org

Figure 10. Government Spending

Government total expenditures

Kim Holder is 11,000 Director of the Center for Economic Education and Financial Literacy, 10,000 Senior Lecturer of

Economics in the 9,000 Richards College of

Business, and Director of Financial s 8,000 l a r Literacy at the University of West Georgia o D

f o

in Carrollton. s n 7,000 i l o B Scott Niederjohn is

Professor of Economics 6,000 and Director of Office for the Advancement of Free Enterprise Education at 5,000 Lakeland University in Plymouth, Wisconsin. 4,000 2008 2010 2012 2014 2016 2018 2020

Source: U.S. Bureau of Economic Analysis fred.stlouisfed.org

Figure 11. Federal Debt as a Percentage of Gross Domestic Product

Federal Debt: Total Public Debt as Percent of Gross Domestic Product

140

135

130

125 P 120 G D

f o t n e

r c 115 P e

110

105

100

95 2015 2016 2017 2018 2019 2020

Sources: OMB; St. Louis Fed fred.stlouisfed.org

March/April 2021 71